Building Your Down Payment

Many borrowers can easily qualify for a mortgage loan, but they can't afford a large down payment. Below are a few straightforward ways to get together a down payment

Reduce expenses and save. Turn your budget upside-down to find extra money to save for your down payment. You could also try enrolling in an automatic savings plan to have a portion of your payroll automatically moved into savings. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or stay local for your vacation.

Sell things you don't need and get a part-time job. Look for a second job. This can be rough, but the temporary trial can help you get your down payment. You can also get serious about the possessions you really need and the things you can put up for sale. Multiple small items might add up to a fair amount at a garage or tag sale. You might also look into what any investments you have will bring if sold.

Borrow from retirement funds. Research the specifics of your individual plan. It is possible to borrow money from a 401(k) for a down payment or perform a withdrawal from an Individual Retirement Account. Be sure you understand about any penalties, the effect this may have on your taxes, and repayment terms.

Ask for assistance from members of your family. First-time buyers are often lucky enough to receive help with their down payment help from gracious family members who may be anxious to help them get into their own home. Your family members may be pleased at the chance to help you reach the milestone of buying your own home.

Learn about housing finance agencies. These types of agencies offer special mortgage loans to low and moderate-income borrowers, buyers with an interest in sprucing up a residence within a particular area, and additional groups as defined by the agency. Working with this kind of agency, you may get an interest rate that is below market, down payment assistance and other advantages. These kinds of agencies can assist eligible buyers with a reduced interest rate, help with your down payment, and offer other advantages. These non-profit agencies exist to promote the value of homes in particular places.

Research no-down and low-down mortgage loans.

  • Federal Housing Administration (FHA) mortgage loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income buyers qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, enabling homebuyers who might not qualify for a traditional mortgage, to get financing. Interest rates with an FHA mortgage are generally the going interest rate, but the down payment requirements for an FHA loan will be below those of conventional loans. The down payment may be as low as 3 percent and the closing costs could be covered by the mortgage loan.

  • VA loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a low fixed interest rate, no down payment, and reduced closing costs. Even though the mortgage loans don't originate from the VA, the office verfifies borrowers by issuing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Most of the time, the first mortgage covers 80% of the purchase price and the "piggyback" is for 10%. The homebuyer covers the remaining 10%, rather than come up with the usual 20% down payment.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her home equity. The buyer finances most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Usually you will pay a somewhat higher interest rate on the loan from the seller.

The feeling of accomplishment will be the same, no matter which method you use to come up with your down payment. Your new home will be worth it!

Want to discuss down payment options? Call us: 714-970-9700.

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