Your Down Payment
Many buyers qualify for several different kinds of mortgages, but they can't afford a large down payment. Here's where to get started
Tighten your belt and save. Be on the look-out for ways to trim your monthly expenses to put away money for a down payment. You might also decide to enroll in an automatic savings plan at your bank to automatically have a specific amount from your paycheck deposited into a savings account. You could look into some big expenses in your spending history that you can do without, or reduce, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.
Sell things you don't really need and get a second job. Maybe you can find a second job and build up your earnings. You can also get serious about the possessions you really need and the items you could be able to sell. You may own collectibles you can put up for sale on an auction website, or household items for a tag or garage sale. Also, you can consider selling any investments you own.
Borrow money from your retirement plan. Check the parameters of your particular plan. Many homebuyers get down payment money from withdrawing funds from Individual Retirement Accounts or borrowing from their 401(k) plans. Be sure you are knowledgable about any penalties, the effect this may have on taxes, and repayment obligation.
Request a gift from family. Many homebuyers are often lucky enough to get down payment help from gracious parents and other family members who are able to help get them in their own home. Your family members may be eager to help you reach the goal of owning your first home.
Research housing finance agencies. Provisional mortgage programs are given to homebuyers in specific situations, such as low income buyers or buyers looking to remodel houses in a certain area, among others. Financing with this kind of agency, you can be given an interest rate that is below market, down payment help and other incentives. Housing finance agencies may assist eligible buyers with a lower rate of interest, help with your down payment, and provide other benefits. The main purpose of non-profit housing finance agencies is build up home ownership in certain places.
Find out about low-down and no-down mortgage loan programs.
- FHA mortgages
The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low to moderate-income buyers qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting home financing.
FHA helps first-time homebuyers and others who might not be eligible for a traditional mortgage on their own, by offering mortgage insurance to lenders.
Interest rates with an FHA mortgage are generally the market interest rate, but the down payment with an FHA mortgage will be less than those of conventional loans. The down payment can go as low as three percent and the closing costs might be packaged in the mortgage loan.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This special loan requires no down payment, has reduced closing costs, and offers a competitive rate of interest. While the VA doesn't actually issue 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 closes at the same time as the first. Generally the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage finances 80 percent. The borrower covers the remaining 10%, rather than needing to pull together the usual 20% down payment.
- Carry-Back loans
With a carry-back mortgage, the seller loans you part of his or her home equity. The buyer funds the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually you'll pay a somewhat higher interest rate on the loan financed by the seller.
The feeling of accomplishment will be the same, no matter which strategy you use to come up with the down payment. Your brand new home will be worth it!
Want to discuss down payments? Call us at 405-513-7700.