Your Down Payment

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Many borrowers qualify for various loan programs, but they can't afford a large down payment. Do you want to look into getting a new home, but aren't sure how you should put together your down payment?

Cut expenses and save. Turn your budget inside out to find ways you can cut expenses to go toward your down payment. There are bank programs in which some of your paycheck is automatically placed into savings every pay period. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or skip a family vacation.

Sell things you do not need and get a part-time job. Look for an additional job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the things you can put up for sale. Maybe you own desirable items you can put up for sale at an online auction, or quality household goods for a garage or tag sale. You could also research what your investments will sell for.

Borrow from retirement funds. Investigate the provisions of your particular plan. Many homebuyers get down payment money by withdrawing what they need from their Individual Retirement Accounts or borrowing from their 401(k) plans. Make sure you understand the tax consequences, repayment terms, and possible early withdrawal penalties.

Ask for help from generous family members. Many homebuyers sometimes receive down payment help from gracious family members who are eager to help get them in their own home. Your family members may be willing to help you reach the goal of buying your own home.

Learn about housing finance agencies. These types of agencies extend provisional mortgage loans to moderate and low income buyers, buyers with an interest in remodeling a house in a specific area, and additional groups as specified by each finance agency. With the help of this kind of agency, you may be given an interest rate that is below market, down payment help and other benefits. Housing finance agencies may help you with a lower interest rate, get you your down payment, and provide other benefits. The principal purpose of not-for-profit housing finance agencies is boosting residential ownership in particular parts of the city.

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 an important part in helping low to moderate-income Americans get mortgage loans. 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 may not be eligible for a typical loan on their own, by offering mortgage insurance to private lenders. Interest rates for an FHA loan are typically the going interest rate, but the down payment with an FHA loan are lower than those of conventional loans. Closing costs may be included in the mortgage, and the down payment can be as low as 3 percent of the total amount.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan assists veterans and service people. This specialized loan does not require a down payment, has limited closing costs, and provides a competitive interest rate. While the VA does not actually finance the loans, it does issue a certificate of eligibility to apply for a VA loan.

• Piggy-back loans

  You may fund your down payment through a second mortgage that closes along with the first. Generally the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage finances 80 percent. In contrast to the traditional 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to loan you a portion of his home equity to assist you with your down payment funds. In this scenario, you would finance the majority of the purchase price with a traditional lending institution and borrow the remaining amount from the seller. Usually you'll pay a somewhat higher rate with the loan from the seller.

Want to discuss down payments? Give us a call at 800.465.1404.1002.