Building Your Down Payment

Lots of buyers can qualify for various loan programs, but they can't afford a large down payment. Want to buy a new home, but don't know how you should get together your down payment?

Cut expenses and save. Be on the look-out for ways you can trim your expenses to put away money for a down payment. There are bank programs in which some of your paycheck is automatically transferred into a savings account each pay period. You would be wise to look into some big expenses in your spending history that you can give up, or trim, at least temporarily. For example, you may move into less expensive housing, or stay local for your vacation.

Sell things you don't really need and get a part-time job. Try to get a second job. This can be exhausting, but the temporary difficulty can provide your down payment money. Additionally, you can make an exhaustive inventory of things you can sell. Unworn gold jewelry can bring a good amount from local jewelry stores. Multiple small things can add up to a nice sum at a garage or tag sale. Also, you might want to think about selling any investments you hold.

Borrow from retirement funds. Check the provisions of your specific program. Some homebuyers get down payment money by withdrawing funds from IRAs or getting funds out of their 401(k) plans. Be sure you are clear about any penalties, the effect this could have on taxes, and repayment terms.

Ask for a generous gift from family. First-time homebuyers somtimes receive help with their down payment assistance from giving family members who may be able to help them get into their own home. Your family members may be pleased to help you reach the goal of having your own home.

Learn about housing finance agencies. These types of agencies offer provisional mortgage programs for low and moderate-income homebuyers, buyers interested in remodeling a residence within a particular part of the city, and other particular kinds of buyers as specified by the agency. Financing with this type of agency, you may get a below market interest rate, down payment assistance and other incentives. These types of agencies can assist eligible homebuyers with a reduced rate of interest, get you your down payment, and provide other benefits. The main purpose of not-for-profit housing finance agencies is boosting residence ownership in certain places.

Explore no-down and low-down mortgage loans.

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in aiding low and moderate-income families get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting mortgages. FHA provides mortgage insurance to private lenders, helping the buyers to become eligible for financing. Interest rates for an FHA loan usually feature the market interest rate, while the down payment amounts for an FHA mortgage will be less than those of conventional loans. Closing costs might be financed in the mortgage, while the down payment can be as low as 3 percent of the total amount.

  • VA mortgage loans

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people are eligible for a VA loan, which usually offers a reasonable fixed rate of interest, no down payment, and limited closing costs. Even though the VA doesn't actually provide the loans, it does issue a certificate of eligibility to qualify for a VA loan.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close at the same time as the first. Usually the piggyback loan is for 10 percent of the home's price, while the first mortgage finances 80 percent. Instead of the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her home equity. In this scenario, you would borrow the majority of the purchase price from a traditional mortgage lender and finance the remaining amount with the seller. Typically you will pay a somewhat higher rate with 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!

Need to talk about down payment options? Call us: 248-644-1200.

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