Putting Together Your Down Payment

Many borrowers can qualify for various loan programs, but they can't afford a large down payment. Do you want to buy a new house, but don't know how to put together a down payment?

Cut expenses and save. Scrutinize your budget to uncover 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 payroll automatically moved into your savings account. You could look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or skip a family vacation.

Work more and sell things you do not need. Try to find a second job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get serious about the possessions you actually need and the items you may be able to sell. Multiple small items may add up to a nice sum at a garage or tag sale. Also, you might want to look into selling any investments you hold.

Borrow from retirement funds. Explore the details for your particular plan. Some homebuyers get down payment money from withdrawing funds from their IRAs or borrowing from their 401(k) plans. Make sure to learn about the tax consequences, your obligation for repayment, and penalties for withdrawing early.

Ask for a gift from family. Many buyers are often fortunate enough to get help with their down payment help from gracious parents and other family members who may be willing to help them get into their own home. Your family members may be eager to help you reach the milestone of owning your own home.

Contact housing finance agencies. These types of agencies offer special loan programs for moderate and low income buyers, buyers interested in rehabilitating a residence in a targeted area, and additional groups as defined by the agency. Financing through this type of agency, you probably will get an interest rate that is below market, down payment assistance and other benefits. Housing finance agencies may assist eligible homebuyers with a lower interest rate, get you your down payment, and offer other benefits. The central mission of not-for-profit housing finance agencies is build up residence ownership in certain places.

Research no-down and low-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 an important part in assisting low to moderate-income individuals get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA aids first-time buyers and others who would not be able to qualify for a typical mortgage loan by themselves, by providing mortgage insurance to private lenders. Down payment requirements for FHA loans are below those with conventional mortgage loans, although these mortgages have average rates of interest. The required down payment can be as low as three percent and the closing costs might be packaged in the mortgage loan.

  • VA mortgage loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which usually offers a reasonable interest rate, no down payment, and minimal closing costs. While it's true that the mortgages aren't actually issued by the VA, the department verfifies applicants by providing eligibility certificates.

  • Piggy-back loans

    You can fund a down payment using a second mortgage that closes at the same time as the first. Usually the piggyback loan is for 10 percent of the purchase amount, and the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, rather than come up with the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to loan you part of his home equity to help you get your down payment funds. The buyer finances most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually you will pay a somewhat higher rate with the loan from the seller.

The feeling of accomplishment will be the same, no matter which approach you use to come up with your down payment. Your new home will be your reward!

Need to talk about the best options for down payments? Give us a call: 562 320-0510.

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