Your Down Payment
Lots of buyers qualify for various loan programs, but they can't afford a large down payment. Here are a few tips:
Tighten your belt and save. Turn your budget inside out to uncover ways you can cut expenses to go toward your down payment. There are bank programs through which a specific portion of your take-home pay is automatically deposited into a savings account each pay period. You might look into some big expenses in your budget that you can live without, or trim, 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 an additional job and build up your earnings. You can also get creative about the items you may be able to sell. Multiple small things may add up to a nice sum at a garage or tag sale. You could also look into what any investments you own could bring if sold.
Tap into retirement funds. Check the parameters of your particular program. Many homebuyers get down payment money by withdrawing from their IRAs or borrowing from their 401(k) plans. Make sure you understand the tax consequences, repayment terms, and penalties for withdrawing early.
Ask for a gift from your family. Many homebuyers are often fortunate enough to receive help with their down payment help from gracious family members who are able to help them get into their own home. Your family members may be happy at the chance to help you reach the goal of having your own home.
Research housing finance agencies. Provisional mortgage loans are offered to homebuyers in specific circumstances, like low income purchasers or future homeowners looking to renovating houses in a certain neighborhood, among others. Working with this type of agency, you can receive a below market interest rate, down payment assistance and other benefits. Housing finance agencies may assist eligible buyers with a reduced rate of interest, get you your down payment, and provide other assistance. The main purpose of not-for-profit housing finance agencies is promoting home ownership in targeted areas.
Learn about low-down and no-down mortgage loans.
- FHA mortgages
The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in assisting low to moderate-income Americans get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in qualifying for mortgages.
FHA provides mortgage insurance to private lenders, making the buyers eligible for a mortgage.
Down payment requirements for FHA mortgages are less than those with conventional mortgage loans, even though these mortgages come with current interest rates. The down payment can go as low as three percent while the closing costs can be financed in the mortgage loan.
- VA mortgages
VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can receive a VA loan, which generally offers a competitive fixed rate of interest, no down payment, and reduced closing costs. Even though the mortgage loans aren't actually financed by the VA, the department verfifies borrowers by providing eligibility certificates.
- Piggy-back loans
You may fund a down payment through a second mortgage that closes with the first. Generally the piggyback loan is for 10 percent of the home's price, while the first mortgage covers 80 percent. The borrower pays the remaining 10%, rather than putting the usual 20% down payment.
- Carry-Back loans
In a "carry back" situation, the seller commits to lend you a portion of his home equity to help you get your down payment money. In this scenario, you would finance the largest portion of the purchase price with a traditional mortgage lending institution and finance the remainder with the seller. Generally, this type of second mortgage will have a higher rate of interest.
No matter your strategy of getting together your down payment money, the thrill of owning your own home will be just as sweet!
Want to discuss the best options for down payments? Give us a call: 562 320-0510.