Building Your Down Payment

Lots of buyers qualify for various loan programs, but they don't have a large sum of cash to pay a down payment. Want to buy a new home, but aren't sure how you should put together a down payment?

Reduce expenses and save. Look for ways you can trim your expenses to set aside money for a down payment. There are bank programs in which some of your take-home pay is automatically deposited into a savings account every pay period. You might look into some big expenses in your budget that you can give up, or reduce, at least temporarily. For example, you might move into less expensive housing, or stay local for your family vacation.

Sell items you don't really need and find a part-time job. Look for a second 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. Broken gold jewelry can be sold at local jewelry stores. A closetful of small items can add up to a nice sum at a garage or tag sale. You can also explore what any investments you own may sell for.

Borrow from retirement funds. Investigate the parameters of your specific plan. Many people get down payment money by withdrawing funds from their Individual Retirement Accounts or borrowing from their 401(k) plans. Be sure to ask your plan representative about the tax ramifications, your obligation for repaying funds, and penalties for withdrawing early.

Request a generous gift from your family. Many homebuyers are sometimes fortunate enough to get down payment assistance from thoughtful parents and other family members who are able to help get them in their first home. Your family members may be happy at the chance to help you reach the milestone of buying your first home.

Research housing finance agencies. These agencies offer provisional loan programs to moderate and low income buyers, buyers interested in renovating a house within a targeted area, and additional groups as defined by each finance agency. With the help of a housing finance agency, you probably will receive a below market interest rate, down payment assistance and other advantages. Housing finance agencies may assist you with a lower interest rate, help with your down payment, and provide other benefits. These non-profit agencies were formed to promote community in certain areas.

Explore no-down and low-down mortgage loan programs.

  • FHA loans

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in assisting low and moderate-income Americans get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time buyers and others who would not be eligible for a traditional loan by themselves, by providing mortgage insurance to lenders. Down payment amounts for FHA mortgages are below those of typical mortgage loans, although these mortgages hold average interest rates. Closing costs can be financed in the mortgage, while your down payment may be as low as 3 percent of the purchase price.

  • VA loans

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which usually offers a competitive rate of interest, no down payment, and minimal closing costs. While it's true that the loans are not actually issued by the VA, the department certifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, and the first mortgage finances 80 percent. The borrower covers the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" mortgage, the seller agrees to lend you a portion of his own equity to help you get your down payment money. In this scenario, you would finance the majority of the purchase price with a traditional mortgage lending institution and finance the remainder with the seller. Usually this type of second mortgage has higher interest.

No matter how you gather your down payment, the thrill of living in your own home will be just as sweet!

Want to discuss down payment options? Call us at 405-513-7700.

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