Building Your Down Payment
Many borrowers can easily qualify for a loan, but they don't have a large sum of cash to pay the standard down payment. Here's where you start
Tighten your belt and save. Be on the look-out for ways you can reduce your expenditures to save toward a down payment. There are bank programs through which a portion of your take-home pay is automatically deposited into savings each pay period. Some effective methods to build up funds include moving into less expensive housing, and skipping a year's vacation.
Sell things you don't really need and get a part-time job. Look for an additional job. This can be rough, but the temporary difficulty can provide your down payment money. In addition, you can make a comprehensive list of things you may be able to sell. Unworn gold jewelry can bring a good amount from local jewelry stores. You may own collectibles you can put up for sale on an auction website, or household items for a garage or tag sale. Also, you might want to consider selling any investments you hold.
Borrow money from your retirement plan. Investigate the parameters of your particular program. Some people get down payment money from withdrawing what they need from their IRAs or borrowing from 401(k) plans. Be sure to find out about the tax consequences, your obligation for repaying the money, and early withdrawal penalties.
Ask for a gift from family. First-time homebuyers are often lucky enough to get down payment help from giving family members who are prepared to help get them in their own home. Your family members may be pleased to help you reach the goal of owning your first home.
Learn about housing finance agencies. These agencies offer provisional mortgate loan programs to low and moderate-income homebuyers, buyers with an interest in renovating a home in a specific area, and additional particular types of buyers as specified by each finance agency. Financing through this type of agency, you may receive a below market interest rate, down payment help and other incentives. Housing finance agencies may assist you with a reduced interest rate, help with your down payment, and offer other advantages. The primary mission of non-profit housing finance agencies is build up residential ownership in specific parts of the city.
Find out about low-down and no-down mortgage loans.
- FHA mortgages
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in aiding low and moderate-income buyers qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to qualify for mortgages.
FHA offers mortgage insurance to the private lenders, helping the buyers to become eligible for a home loan.
Interest rates with an FHA mortgage are usually the current interest rate, but the down payment amounts for an FHA loan are below those of conventional loans. Closing costs might be covered by the mortgage, and the down payment can be as low as 3% of the total amount.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan assists veterens and service people. This particular loan requires no down payment, has reduced closing costs, and provides a competitive interest rate. While the loans aren't actually financed by the VA, the office certifies borrowers by providing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes with the first. In most cases the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. The homebuyer covers the remaining 10%, rather than having to pull together the usual 20% down payment.
- Carry-Back loans
In a "carry back" agreement, the seller commits to lend you a portion 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 remaining funds from the seller. Often, this form of second mortgage will have higher interest.
The feeling of accomplishment will be the same, no matter which method you use to come up with your down payment. Your brand new home will be your reward!
Need to talk about the best options for down payments? Give us a call at 972.798.2110.