Putting Together Your Down Payment

Lots of buyers can easily qualify for a loan, but they can't afford a large down payment. Here's where to get started

Reduce expenses and save. Turn your budget inside out to find ways you can cut expenses to go toward your down payment. Also, you can look into bank programs through which a specific portion of your take-home pay is automatically placed into a savings account every pay period. You might look into some big expenses in your spending history that you can do without, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Work more and sell items you don't need. Look for an additional job. This can be exhausting, but the temporary trial can provide your down payment money. Additionally, you can make an exhaustive inventory of things you can sell. Broken gold jewelry can be sold at local jewelers. Multiple small items might add up to a nice sum at a garage or tag sale. Also, you can consider selling any investments you hold.

Borrow from a retirement plan. Investigate the parameters of your specific plan. Many homebuyers get down payment money by withdrawing funds from their IRAs or borrowing from 401(k) programs. Make sure to ask your plan representative about the tax consequences, repayment terms, and any early withdrawal penalties.

Ask for help from members of your family. First-time homebuyers somtimes get down payment help from gracious family members who may be prepared to help get them in their first home. Your family members may be pleased at the chance to help you reach the milestone of buying your first home.

Research housing finance agencies. These agencies offer special mortgage programs to moderate and low income borrowers, buyers interested in sprucing up a house within a targeted part of the city, and other specific kinds of buyers as specified by each agency. With the help of a housing finance agency, you can get an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies can assist eligible homebuyers with a reduced rate of interest, get you your down payment, and offer other benefits. These non-profit programs were established to build up community in specific neighborhoods.

Research no-down and low-down mortgage loans.

  • FHA loans

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a significant role in assisting low and moderate-income Americans get 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, ensuring the buyers are eligible for a loan. Down payment requirements for FHA loans are smaller than those with conventional mortgages, although these mortgages come with average interest rates. Closing costs can be covered by the mortgage, while the down payment may be as low as 3% of the total amount.

  • VA mortgage loans

    VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which generally offers a competitive interest rate, no down payment, and limited closing costs. Even though the VA doesn't actually finance the mortgage loans, it does issue a certificate of eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You can fund your down payment using a second mortgage that closes with the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. Instead of the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" agreement, the seller agrees to loan you part of his own equity to help you get your down payment funds. The buyer funds the majority of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually you will pay a slightly higher interest rate with the loan financed by the seller.

No matter how you gather your down payment, the thrill of owning your own home will be just as sweet!

Want to discuss the best options for down payments? Call us: 562 320-0510.

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