Your Down Payment

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Lots of people who are looking to purchase a new home can qualify for several different kinds of mortgages, but they can't afford a large down payment. Here are a few ideas:

Reduce expenses and save. Scrutinize your budget to discover extra money to save for your down payment. You also might enroll in an automatic savings plan at your bank to have a percentage of your pay automatically transferred into your savings account. Some practical methods to build up funds include moving into less expensive housing, and skipping your family vacation for a year or two.

Sell items you do not need and find a second job. Maybe you can find a second job and save your earnings. Additionally, you can put together a comprehensive list of items you can sell. Unused gold jewelry can be sold at local jewelry stores. You might own collectibles you can sell on an auction website, or quality household goods for a garage or tag sale. You can also explore what your investments could bring if sold.

Borrow your down payment from your retirement plan. Investigate the provisions of your specific program. You may take out money from a 401(k) for a down payment or get a withdrawal from an IRA. Be sure you understand about any penalties, the effect this could have on your income taxes, and repayment terms.

Ask for help from members of your family. Many homebuyers sometimes receive down payment help from gracious family members who may be prepared to help get them in their own home. Your family members may be pleased at the chance to help you reach the goal of buying your first home.

Contact housing finance agencies. These types of agencies provide provisional mortgage programs for moderate and low income buyers, buyers with an interest in remodeling a residence in a specific area, and other certain kinds of buyers as specified by each finance agency. Working through this kind of agency, you probably will get a below market interest rate, down payment help and other benefits. Housing finance agencies may help eligible homebuyers with a lower interest rate, help with your down payment, and offer other assistance. These non-profit programs were formed to build up community in certain areas.

Find out about low-down and no-down mortgage loan programs.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in helping low to moderate-income buyers get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who wish to qualify for mortgage loans. FHA provides mortgage insurance to private lenders, ensuring the buyers are eligible for a mortgage loan. Down payment requirements for FHA loans are lower than those with conventional mortgage loans, even though these mortgages come with average rates of interest. The down payment may be as low as 3 percent while the closing costs may be covered by the mortgage.

• VA mortgages

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which typically offers a reasonable fixed interest rate, no down payment, and minimal closing costs. Although the VA does not finance the mortgage loans, it does certify eligibility to qualify for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with 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 homebuyer pays the remaining 10%, instead of come up with the usual 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller commits to lend you some of his home equity to help you get your down payment funds. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and borrow the remainder from the seller. Generally, this kind of second mortgage will have higher interest.

Need to talk about down payments? Call us: (805) 432-4898.