Putting Together Your Down Payment
Many buyers can easily qualify for various loan programs, but they don't have a lot of money to pay the standard down payment. Below are a few straightforward ways to get together a down payment
Reduce expenses and save. Look for ways to trim your expenditures to set aside money for a down payment. There are bank programs in which some of your paycheck is automatically transferred into savings every pay period. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.
Work a second job and sell things you don't need. Look for a second job. This can be exhausting, but the temporary difficulty can provide your down payment money. You can also get creative about the items you can put up for sale. A closetful of small items might add up to a fair amount at a garage or tag sale. You might also explore what any investments you own may sell for.
Borrow your down payment from a retirement plan. Check the parameters of your particular plan. Some homebuyers get down payment money by withdrawing funds from their IRAs or pulling money out of 401(k) plans. Make sure you know about any penalties, the way this may affect on your income taxes, and repayment obligation.
Ask for help from members of your family. Many homebuyers are sometimes lucky enough to get down payment help from giving family members who may be prepared to help them get into their own home. Your family members may be pleased to help you reach the milestone of buying your own home.
Research housing finance agencies. Provisional mortgage loans are offered to homebuyers in specific circumstances, like low income homebuyers or future homeowners planning to remodel homes in a targeted place, among others. With the help of this type of agency, you probably will receive an interest rate that is below market, down payment assistance and other incentives. These kinds of agencies can assist eligible homebuyers with a lower rate of interest, get you your down payment, and offer other benefits. These non-profit programs to boost the value of homes in certain places.
Research no-down and low-down mortgages.
- Federal Housing Administration (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 helping low to moderate-income Americans get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who wish to qualify for home financing.
FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a mortgage loan.
Interest rates for an FHA mortgage typically feature the going interest rate, but the down payment amounts for an FHA loan are lower than those of conventional loans. The required down payment can go as low as three percent while the closing costs can be packaged in the mortgage loan.
- VA loans
VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which generally offers a reasonable rate of interest, no down payment, and reduced closing costs. While the VA doesn't actually finance the mortgages, it does issue a certificate of eligibility to qualify for a VA mortgage.
- Piggy-back loans
You can finance a down payment through a second mortgage that closes at the same time as the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. The borrower covers the remaining 10%, rather than putting the typical 20% down payment.
- Carry-Back loans
In the case of a seller "carrying back a second mortgage," the seller loans you part of his or her equity. You would borrow the largest portion of the purchase price from a traditional mortgage lender and finance the remaining amount with the seller. Typically you will pay a slightly higher rate with the loan from the seller.
No matter how you gather your down payment, the satisfaction of reaching the goal of living in your own home will be just as sweet!
Want to discuss down payment options? Give us a call at 866-840-8745 x2.
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