Building Your Down Payment

Many folks who are looking to purchase a new home qualify for several different kinds of mortgages, but they can't afford a large down payment. Do you want to buy a new house, but aren't sure how you should get together your down payment?

Tighten your belt and save. Look for ways you can reduce your monthly expenditures to set aside funds for a down payment. Also, you can look into bank programs through which some of your take-home pay is automatically deposited into savings every pay period. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or stay local for your family vacation.

Sell things you don't really need and get a second job. Maybe you can find a second job to get your down payment money. You can also get creative about the things you can sell. A closetful of small items could add up to a fair amount at a garage or tag sale. You can also look into what any investments you have will bring if sold.

Borrow funds from a retirement plan. Check the parameters of your specific plan. It is possible to take out funds from a 401(k) for a down payment or make a withdrawal from an IRA. Make sure to learn about the tax ramifications, repayment terms, and any early withdrawal penalties.

Ask for help from family members. Many buyers somtimes receive help with their down payment assistance from gracious family members who may be willing to help get them in their first home. Your family members may be eager to help you reach the milestone of having your first home.

Contact housing finance agencies. Provisional mortgage loans are extended to buyers in specific situations, such as low income purchasers or people planning to improve homes in a particular neighborhood, among others. Working with this kind of agency, you can get a below market interest rate, down payment assistance and other perks. These kinds of agencies may assist you with a reduced rate of interest, get you your down payment, and offer other advantages. The primary mission of not-for-profit housing finance agencies is to promote residential ownership in particular areas.

Research no-down and low-down mortgage loans.

  • FHA mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in aiding low and moderate-income individuals qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a home loan. Interest rates for an FHA mortgage are normally the current interest rate, while the down payment amounts for an FHA loan are smaller than those of conventional loans. The required down payment may go as low as 3 percent while the closing costs might be financed in the mortgage.

  • VA loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which typically offers a competitive fixed interest rate, no down payment, and minimal closing costs. Even though the mortgage loans aren't actually financed by the VA, the office certifies borrowers by issuing eligibility certificates.

  • Piggy-back loans

    You may fund a down payment with a second mortgage that closes along with the first. Most of the time, the piggyback loan is for 10 percent of the purchase amount, and the first mortgage covers 80 percent. In contrast to the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller commits to loan you part of his own equity to help you with your down payment funds. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lender and finance the remaining amount with the seller. Often, this form of second mortgage will have higher interest.

No matter how you gather your down payment, the thrill of living in your own home will be just as great!

Need to talk about down payments? Give us a call: 714-970-9700.

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