Putting Together Your Down Payment

Many people who are looking to purchase a new home qualify for various loan programs, but they can't afford a large down payment. Here are a few tips:

Cut expenses and save. Look for ways to trim your monthly expenditures to put away money for a down payment. There are bank programs in which a specific portion of your paycheck is automatically transferred into a savings account each pay period. Some effective methods to build up funds include moving into less expensive housing, and staying local for your family vacation this year.

Work more and sell things you don't need. Look for an additional job. This can be rough, but the temporary trial can help you get your down payment. In addition, you can make an exhaustive inventory of items you can sell. Unused gold jewelry can be sold at local jewelry stores. You might own collectibles you can sell on an online auction, or household goods for a garage or tag sale. You can also research what any investments you hold could bring if sold.

Borrow money from a retirement plan. Explore the details of your individual plan. Many people get down payment money by withdrawing funds from IRAs or pulling funds out of 401(k) plans. Make sure you understand the tax consequences, your obligation for repaying the money, and any early withdrawal penalties.

Ask for help from generous members of your family. Many buyers are sometimes lucky enough to receive help with their down payment assistance from caring family members who are able to help them get into their first home. Your family members may be eager to help you reach the milestone of buying your own home.

Learn about housing finance agencies. Provisional mortgate loan programs are offered to buyers in certain situations, like low income homebuyers or homebuyers planning to improve houses in a particular neighborhood, among others. Working through this type of agency, you may get a below market interest rate, down payment help and other perks. Housing finance agencies can help eligible buyers with a reduced interest rate, get you your down payment, and provide other benefits. The principal purpose of non-profit housing finance agencies is promoting home ownership in targeted areas.

Learn about low-down and no-down mortgages.

  • 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 part in assisting low and moderate-income buyers get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a mortgage. Down payment requirements for FHA mortgages are smaller than those with conventional mortgages, although these loans come with average interest rates. Closing costs may be included in the mortgage, while the down payment may be as low as 3% of the total.

  • VA mortgage loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can receive a VA loan, which generally offers a competitive fixed interest rate, no down payment, and minimal closing costs. Even though the VA does not actually finance the mortgage loans, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You can fund a down payment with a second mortgage that closes along with the first. Generally the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage finances 80 percent. The homebuyer covers the remaining 10%, rather than needing to pull together the typical 20% down payment.

  • Carry-Back loans

    In a "carry back" mortgage, the seller agrees to loan you a portion of his own equity to help you with your down payment funds. In this scenario, you would finance the majority of the purchase price with a traditional mortgage lender and borrow the remainder from the seller. Usually this kind of second mortgage has a higher rate of interest.

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

Need to talk about down payments? Call us: 405-513-7700.

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