Building Your Down Payment

Many people who would like to buy a new house can qualify for several different kinds of mortgages, but they don't have a lot of money to put up the standard down payment. Want to buy a new house, but aren't sure how to put together your down payment?

Slash your budget and build up savings. Be on the look-out for ways to reduce your monthly expenditures to set aside funds for a down payment. There are bank programs through which a specific portion of your take-home pay is automatically placed into savings every pay period. Some practical approaches to save additional funds include moving into less expensive housing, and staying home for your vacation for a year or two.

Work more and sell things you do not need. Try to find a second job. This can be rough, but the temporary difficulty can help you get your down payment. In addition, you can put together a comprehensive inventory of items you may be able to sell. Unworn gold jewelry can bring a good price from local jewelers. You might own collectibles you can put up for sale on an online auction, or household items for a garage or tag sale. You can also explore what any investments you own may bring if sold.

Borrow money from your retirement plan. Research the specifics of your particular plan. Some people get down payment money by withdrawing what they need from their Individual Retirement Accounts or pulling funds out of their 401(k) plans. Be sure you comprehend the tax consequences, your obligation for repayment, and possible penalties for withdrawing early.

Ask for a generous gift from family. First-time buyers are often fortunate enough to receive down payment assistance from gracious parents and other family members who may be eager to help them get into their first home. Your family members may be eager to help you reach the milestone of having your own home.

Research housing finance agencies. Provisional mortgage loans are provided to homebuyers in certain situations, like low income homebuyers or future homeowners planning to renovating houses in a particular part of town, among others. Financing with a housing finance agency, you may be given an interest rate that is below market, down payment help and other incentives. Housing finance agencies may help eligible homebuyers with a reduced rate of interest, get you your down payment, and offer other advantages. The primary mission of non-profit housing finance agencies is promoting the purchase of homes in targeted places.

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

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in assisting low and moderate-income Americans get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time buyers and others who might not be eligible for a conventional loan on their own, by providing mortgage insurance to private lenders. Interest rates for an FHA mortgage usually feature the current interest rate, while the down payment amounts for an FHA mortgage will be lower than those of conventional loans. Closing costs may be included in the mortgage, while your down payment could be as low as 3 percent of the purchase price.

  • VA mortgages

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This special loan does not require a down payment, has limited closing costs, and offers a competitive interest rate. While the mortgages are not actually issued by the VA, the office certifies applicants by issuing eligibility certificates.

  • Piggy-back loans

    You can fund your down payment through a second mortgage that closes along with the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, while the first mortgage covers 80 percent. Instead of the traditional 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to lend you a portion of his own equity to help you with your down payment funds. The buyer finances the majority of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually this type of second mortgage will have a higher rate of interest.

The satisfaction will be the same, no matter which approach you use to come up with your down payment. Your new home will be worth it!

Need to talk about down payments? Give us a call: 405-513-7700.

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