Building Your Down Payment
Many buyers can qualify for various loan programs, but they can't afford a large down payment. Here are a few ideas:
Slash your budget and build up savings. Be on the look-out for ways to reduce your expenses to put away money for a down payment. You might also try enrolling in an automatic savings plan to automatically have a set portion of your take-home pay transferred into savings. You could look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. For example, you may move into less expensive housing, or stay close to home for your annual vacation.
Sell things you don't need and find a part-time job. Perhaps you can find a second job to get your down payment money. You can also get creative about the things you can sell. Maybe you have desirable items you can sell on an auction website, or household goods for a tag or garage sale. Also, you can think about selling any investments you own.
Borrow from your retirement plan. Investigate the parameters of your specific program. Many people get down payment money by withdrawing from their IRAs or borrowing from their 401(k) programs. Make sure to find out about the tax consequences, your obligation for repayment, and any penalties for withdrawing early.
Ask for a gift from family. Many buyers somtimes receive down payment help from giving parents and other family members who are able to help get them in their own home. Your family members may be inclined to help you reach the milestone of owning your first home.
Research housing finance agencies. These types of agencies provide special mortgate loan programs- for low and moderate-income homebuyers, buyers interested in remodeling a residence in a specific area, and other groups as defined by the finance agency. Working with this kind of agency, you probably will get an interest rate that is below market, down payment assistance and other perks. These types of agencies can assist you with a reduced interest rate, help with your down payment, and provide other assistance. These non-profit programs were established to build up community in specific neighborhoods.
Research no-down and low-down mortgages.
- Federal Housing Administration (FHA) mortgage loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income individuals qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgages.
FHA provides mortgage insurance to the private lenders, enabling buyers who will not be eligible for a traditional mortgage loan, to obtain a mortgage.
Down payment requirements for FHA loans are lower than those of traditional mortgage loans, even though these mortgages have average interest rates. Closing costs can be included in the mortgage, while your down payment could be as low as 3% of the total amount.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This particular loan requires no down payment, has limited closing costs, and provides the advantage of a competitive interest rate. While the VA does not provide the mortgage loans, it does issue a certificate of eligibility to apply for a VA loan.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes along with the first. Usually the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage covers 80 percent. The borrower covers the remaining 10%, instead of having to pull together the typical 20% down payment.
- Carry-Back loans
In the case of the seller "carrying back a second mortgage," the you borrow a portion of the seller's home equity.. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Usually you will pay a slightly higher interest rate with the loan from the seller.
The satisfaction will be the same, no matter how you manage to pull together the down payment. Your new home will be well worth it!
Want to discuss the best options for down payments? Give us a call at 714-970-9700.