Putting Together Your Down Payment
Many buyers qualify for several different kinds of mortgages, but they can't afford a large down payment. Here are a few straightforward ways to put together a down payment
Slash the budget and build up savings. Scrutinize the budget to discover ways you can cut expenses to go toward your down payment. Also, you can look into bank programs through which some of your paycheck is automatically deposited into savings each pay period. You could look into some big expenses in your spending history that you can live without, or trim, at least temporarily. For example, you may move into less expensive housing, or skip a family vacation.
Work a second job and sell things you do not need. Maybe you can find an additional job to get your down payment money. Additionally, you can put together an exhaustive inventory of things you may be able to sell. Unused gold jewelry can bring a good amount from local jewelry stores. Maybe you have desirable items you can sell on an auction website, or quality household items for a tag or garage sale. Also, you can think about selling any investments you hold.
Tap into retirement funds. Research the details of your individual plan. Some homebuyers get down payment money by withdrawing funds from IRAs or borrowing from their 401(k) plans. You will need to be sure you are clear about any penalties, the effect this will have on your taxes, and repayment terms.
Ask for help from generous members of your family. First-time buyers are sometimes fortunate enough to get down payment help from gracious parents and other family members who may be eager to help them get into their own home. Your family members may be willing to help you reach the goal of having your first home.
Research housing finance agencies. Special mortgage loans are provided to homebuyers in certain circumstances, such as low income homebuyers or homebuyers looking to renovating homes in a targeted neighborhood, among others. Working through this type of agency, you may receive a below market interest rate, down payment assistance and other perks. These kinds of agencies can help eligible buyers with a lower interest rate, get you your down payment, and provide other benefits. These non-profit programs were established to build up home ownership in specific neighborhoods.
Learn about low-down and no-down mortgage loans.
- 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 part 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) aids individuals who need to get home financing.
FHA aids first-time homebuyers and others who would not be able to qualify for a conventional loan on their own, by offering mortgage insurance to the lenders.
Interest rates with an FHA mortgage typically feature the market interest rate, while the down payment for an FHA mortgage are below those of conventional loans. Closing costs can be included in the mortgage, while the down payment may be as low as 3 percent of the total amount.
- VA mortgage loans
VA loans are backed by the Department of Veterans Affairs. Veterens and service people can receive a VA loan, which generally offers a reasonable rate of interest, no down payment, and limited closing costs. Even though the loans aren't actually issued by the VA, the department verfifies applicants by issuing eligibility certificates.
- Piggy-back loans
You can finance a down payment with a second mortgage that closes 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. Instead of the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" agreement, the seller commits to loan you some of his home equity to assist you with your down payment funds. You would borrow the majority of the purchase price from a traditional mortgage lending institution and finance the remaining amount with the seller. Usually this kind of second mortgage has higher interest.
The feeling of accomplishment will be the same, no matter which method you use to come up with the down payment. Your brand new home will be worth it!
Want to discuss down payments? Call us: 562 320-0510.