Putting Together Your Down Payment
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Lots of buyers can qualify for various loan programs, but they can't afford a large down payment. Here are a few tips:
Cut expenses and save. Look for ways to trim your monthly expenditures to save toward a down payment. There are bank programs through which a specific portion of your paycheck is automatically deposited into savings each pay period. You might look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your vacation.
Sell things you don't need and find a part-time job. Perhaps you can find an additional job to get your down payment money. Additionally, you can put together an exhaustive inventory of items you can sell. Unworn gold jewelry can bring a good amount from local jewelry stores. Multiple small things can 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 your down payment from a retirement plan. Explore the specifics of your individual plan. Many homebuyers get down payment money from withdrawing from their Individual Retirement Accounts or borrowing from 401(k) plans. Be sure to find out about the tax consequences, your obligation for repaying funds, and possible early withdrawal penalties.
Ask for help from family members. Many buyers are sometimes lucky enough to get help with their down payment assistance from caring parents and other family members who may be prepared 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. Special mortgage loan programs are provided to homebuyers in certain situations, such as low income homebuyers or future homeowners looking to renovating houses in a targeted neighborhood, among others. With the help of this kind of agency, you may get a below market interest rate, down payment assistance and other advantages. These types of agencies may help eligible homebuyers with a reduced interest rate, help with your down payment, and provide other advantages. The central mission of non-profit housing finance agencies is to promote residential ownership in targeted places.
Explore no-down and low-down mortgage loan programs.
- Federal Housing Administration (FHA) loans
The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income Americans qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to get home financing.
FHA offers mortgage insurance to private lenders, helping the buyers to become eligible for a loan.
Interest rates for an FHA loan are generally the current interest rate, while the down payment amounts for an FHA mortgage are lower than those of conventional loans. The required down payment may go as low as 3 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. Service persons and veterans qualify for a VA loan, which typically offers a low interest rate, no down payment, and limited closing costs. While the VA doesn't provide the loans, it does issue a certificate of eligibility to qualify for a VA loan.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close at the same time as the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase price, while the first mortgage finances 80 percent. The borrower pays the remaining 10%, instead of putting the usual 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to loan you some 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 borrows the remainder from the seller. Usually this type of second mortgage will have higher interest.
The feeling of accomplishment will be the same, no matter how you manage to get together your down payment. Your new home will be your reward!
Need to talk about down payment options? Call us: 916-989-6222.