Building Your Down Payment
Many borrowers can easily qualify for a loan, but they don't have a large sum of cash to put up a down payment. Here's where you start
Cut expenses and save. Turn your budget inside out to discover ways you can cut expenses to save for your down payment. You could also try enrolling in an automatic savings plan at your bank to have a portion of your pay automatically transferred into savings. You would be wise to look into some big expenses in your budget that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a family vacation.
Work more and sell items you don't need. Maybe you can find a second job and save your earnings. You can also get creative about the items you may be able to sell. Multiple small items might add up to a fair amount at a garage or tag sale. Also, you might want to consider selling any investments you own.
Borrow funds from your retirement plan. Check the provisions of your particular program. Many homebuyers get down payment money from withdrawing from Individual Retirement Accounts or taking funds out of 401(k) programs. You will want to make sure you know about any penalties, the effect this could have on taxes, and repayment terms.
Ask for a gift from your family. First-time homebuyers somtimes receive help with their down payment assistance from giving family members who may be anxious to help them get into their first home. Your family members may be willing to help you reach the milestone of having your first home.
Learn about housing finance agencies. These agencies offer special loan programs for moderate and low income homebuyers, buyers with an interest in remodeling a home in a specific part of the city, and other groups as specified by each finance agency. With the help of a housing finance agency, you may be given an interest rate that is below market, down payment help and other benefits. Housing finance agencies can assist eligible homebuyers with a lower interest rate, help with your down payment, and provide other benefits. The principal goal of non-profit housing finance agencies is to boost residential ownership in targeted places.
Find out about low-down and no-down mortgage loan programs.
- Federal Housing Administration (FHA) mortgages
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in aiding low to moderate-income Americans get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to qualify for mortgage loans.
FHA helps first-time homebuyers and others who would not be able to qualify for a conventional mortgage on their own, by offering mortgage insurance to private lenders.
Interest rates for an FHA mortgage usually feature the market interest rate, but the down payment requirements for an FHA mortgage are below those of conventional loans. Closing costs might be included in the mortgage, while the down payment might be as low as 3 percent of the total.
- VA loans
VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can receive a VA loan, which generally offers a competitive fixed interest rate, no down payment, and minimal closing costs. While the VA doesn't actually issue the mortgages, it does certify eligibility to apply for a VA mortgage.
- Piggy-back loans
You may finance your down payment through a second mortgage that closes along with the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage covers 80 percent. The borrower pays the remaining 10%, instead of putting the typical 20% down payment.
- Carry-Back loans
We a seller carries back a second mortgage, the seller loans you part of his or her equity. The buyer funds most of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Usually you'll pay a slightly higher interest rate on the loan from the seller.
The satisfaction will be the same, no matter which method you use to get together your down payment. Your new home will be well worth it!
Want to discuss down payment options? Give us a call at (513) 713-1515.