Putting Together Your Down Payment
Many borrowers can qualify for several different kinds of mortgages, but they can't afford a large down payment. Want to look into getting a new home, but don't know how to put together a down payment?
Tighten your belt and save. Be on the look-out for ways to reduce your monthly expenses to set aside money for a down payment. Also, you can look into bank programs through which some of your paycheck is automatically deposited into a savings account every pay period. You could look into some big expenses in your budget 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.
Work a second job and sell things you do not need. Maybe you can get a second job and save your earnings. You can also get serious about the possessions you really need and the things you migh be able to sell. Maybe you own desirable items you can sell on an online auction, or quality household items for a tag or garage sale. Also, you can consider selling any investments you hold.
Borrow money from a retirement plan. Research the specifics of your individual plan. Some homebuyers get down payment money from withdrawing what they need from IRAs or borrowing from their 401(k) plans. Be sure you comprehend the tax ramifications, repayment terms, and early withdrawal penalties.
Ask for assistance from generous members of your family. Many buyers are sometimes lucky enough to get help with their down payment help from thoughtful parents and other family members who are prepared to help them get into their first home. Your family members may be eager to help you reach the goal of having your own home.
Contact housing finance agencies. Special mortgage programs are offered to homebuyers in specific situations, such as low income purchasers or buyers looking to improve homes in a specific place, among others. Working through this kind of agency, you may be given an interest rate that is below market, down payment assistance and other benefits. Housing finance agencies can assist eligible homebuyers with a reduced rate of interest, get you your down payment, and provide other advantages. The primary goal of non-profit housing finance agencies is boosting residential ownership in certain places.
Find out about low-down and no-down mortgage loans.
- FHA mortgage loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding 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) helps individuals get
FHA aids first-time homebuyers and others who would not be able to qualify for a traditional mortgage by themselves, by offering mortgage insurance to the lenders.
Interest rates for an FHA mortgage usually feature the going interest rate, while the down payment with an FHA mortgage will be lower than those of conventional loans. The required down payment may be as low as three percent while the closing costs might be covered by the mortgage.
- VA loans
Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This particular loan requires no down payment, has mimimal closing costs, and offers a competitive rate of interest. Although the mortgages don't originate from the VA, the department certifies applicants by issuing eligibility certificates.
- Piggy-back loans
You can fund a down payment using a second mortgage that closes with the first. Generally the piggyback loan is for 10 percent of the purchase price, while the first mortgage finances 80 percent. Rather than the traditional 20 percent down payment, the buyer just has to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" mortgage, the seller commits to lend you part of his own equity to help you get your down payment money. You would borrow the majority of the purchase price from a traditional mortgage lender and borrow the remainder from the seller. Often, this kind 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 your reward!
Want to discuss down payment options? Call us at 248-644-1200.