Building Your Down Payment

Many borrowers qualify for various loan programs, but they can't afford a large down payment. Here are a few straightforward methods that will help you put together a down payment

Slash the budget and build up savings. Turn your budget inside out to find extra money to save for your down payment. Also, you can look into bank programs in which a specific portion of your paycheck is automatically transferred into a savings account each pay period. You could look into some big expenses in your budget that you can live without, or trim, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a family vacation.

Work a second job and sell things you don't need. Try to get an additional job. This can be exhausting, but the temporary trial can help you get your down payment. In addition, you can make an exhaustive inventory of things you can sell. Unworn gold jewelry can bring a good amount from local jewelers. You may have collectibles you can put up for sale at an auction website, or quality household items for a tag or garage sale. You could also explore what your investments could bring if sold.

Tap into your retirement funds. Check the parameters of your retirement program. You may take out funds from a 401(k) plan for you down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms, and any penalties for withdrawing early.

Request a gift from your family. First-time homebuyers are sometimes fortunate enough to receive help with their down payment help from giving family members who are anxious to help them get into their first home. Your family members may be pleased to help you reach the goal of buying your own home.

Research housing finance agencies. These types of agencies offer provisional mortgage loans for low and moderate-income borrowers, buyers with an interest in renovating a residence in a particular part of the city, and additional particular types of buyers as defined by each agency. With the help of a housing finance agency, you probably will get a below market interest rate, down payment assistance and other perks. Housing finance agencies can assist eligible buyers with a lower rate of interest, help with your down payment, and offer other assistance. The principal goal of not-for-profit housing finance agencies is boosting home ownership in specific places.

Research no-down and low-down mortgage loans.

  • FHA loans

    The Federal Housing Administration (FHA), a 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 mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA aids first-time homebuyers and others who might not be eligible for a traditional loan on their own, by offering mortgage insurance to lenders. Interest rates for an FHA loan are generally the market interest rate, but the down payment for an FHA mortgage will be smaller than those of conventional loans. The down payment may go as low as 3 percent and the closing costs might be financed in the mortgage.

  • VA mortgages

    With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This particular loan does not require a down payment, has mimimal closing costs, and offers a competitive interest rate. While the VA doesn't finance the mortgage loans, it does certify eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You can fund a 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 price, and the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, instead of come up with the usual 20% down payment.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her equity. The buyer funds the majority of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Typically you'll pay a slightly higher rate on the loan from the seller.

No matter how you gather your down payment, the satisfaction of reaching the goal of owning your own home will be just as sweet!

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

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