Building Your Down Payment
Lots of borrowers can easily qualify for a mortgage loan, but they can't afford a large down payment. Start here
Tighten your belt and save. Look for ways to reduce your monthly expenses to save toward a down payment. There are bank programs in which some of your take-home pay is automatically transferred into savings each pay period. You could look into some big expenses in your budget that you can live without, or trim, at least temporarily. For example, you may move into less expensive housing, or stay local for your annual vacation.
Sell things you do not need and get a part-time job. Try to get 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 items you could be able to put up for sale. Multiple small things may add up to a fair amount at a garage or tag sale. Also, you might want to look into selling any investments you hold.
Tap into retirement funds. Research the specifics of your individual plan. It is possible to borrow money from a 401(k) for you down payment or perform a withdrawal from an Individual Retirement Account. Be sure you understand the tax ramifications, your obligation for repayment, and possible penalties for withdrawing early.
Ask for a gift from your family. Many homebuyers are often fortunate enough to get down payment assistance from caring parents and other family members who may be prepared to help them get into their own home. Your family members may be eager to help you reach the milestone of having your own home.
Contact housing finance agencies. These agencies offer special loan programs for moderate and low income buyers, buyers interested in remodeling a residence within a specific area, and other groups as specified by the agency. Financing with this type of agency, you may get an interest rate that is below market, down payment help and other benefits. These types of agencies can help eligible homebuyers with a reduced interest rate, get you your down payment, and provide other benefits. The central purpose of not-for-profit housing finance agencies is boosting residence ownership in specific parts of the city.
Explore no-down and low-down mortgage loans.
- Federal Housing Administration (FHA) mortgage loans
The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income buyers qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who wish to qualify for mortgages.
FHA offers mortgage insurance to private lenders, enabling new homebuyers who may not be eligible for a traditional mortgage, to obtain a mortgage.
Down payment totals for FHA mortgages are lower than those for traditional mortgages, even though these mortgages hold average interest rates. Closing costs may be included in the mortgage, while the down payment might be as low as 3% of the total.
- VA loans
VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which generally offers a low rate of interest, no down payment, and limited closing costs. Although the VA does not actually finance the mortgages, it does certify eligibility to qualify for a VA loan.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes along with the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The borrower pays the remaining 10%, rather than putting the usual 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to loan you part of his own equity to help you with your down payment funds. The buyer finances most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Often, this form of second mortgage will have higher interest.
No matter how you gather your down payment, the satisfaction of reaching the goal of owning your own home will be just as great!
Need to talk about the best options for down payments? Call us at 248-644-1200.
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