Your Down Payment
Lots of folks who are looking to buy a new house qualify for a loan, but they don't have much to put up a down payment. Here's where you start
Tighten your belt and save. Turn your budget inside out to uncover ways you can cut expenses to save for your down payment. There are bank programs in which some of your paycheck is automatically transferred into a savings account each pay period. Some effective methods to save additional funds include moving into less expensive housing, and skipping your family vacation for a year or two.
Sell things you don't need and get a part-time job. Perhaps you can get a second job and save your earnings. You can also get creative about the things you can sell. Maybe you own collectibles you can put up for sale on an online auction, or quality household goods for a garage or tag sale. You might also research what any investments you own could bring if sold.
Borrow from your retirement plan. Check the parameters of your retirement program. Some homebuyers get down payment money from withdrawing from their IRAs or borrowing from their 401(k) programs. Make sure you comprehend the tax consequences, repayment terms, and penalties for withdrawing early.
Ask for assistance from generous family members. Many buyers are often lucky enough to receive down payment assistance from giving family members who may be willing to help them get into their own home. Your family members may be eager to help you reach the goal of buying your own home.
Research housing finance agencies. Special mortgage loans are given to homebuyers in specific circumstances, such as low income buyers or people planning to improve houses in a certain part of town, among others. Working through a housing finance agency, you may receive an interest rate that is below market, down payment assistance and other advantages. Housing finance agencies may assist eligible buyers with a reduced interest rate, help with your down payment, and provide other assistance. The principal mission of not-for-profit housing finance agencies is to boost the purchase of homes in certain places.
Explore no-down and low-down mortgages.
- FHA mortgages
The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low to moderate-income families qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting mortgages.
FHA helps first-time buyers and others who may not be able to qualify for a typical mortgage loan on their own, by offering mortgage insurance to lenders.
Interest rates with an FHA mortgage typically feature the market interest rate, but the down payment with an FHA loan are below those of conventional loans. The down payment may be as low as three percent while the closing costs might be included in the mortgage.
- VA mortgages
VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a reasonable rate of interest, no down payment, and minimal closing costs. Although the loans aren't actually provided by the VA, the department verfifies applicants by providing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close with the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer pays the remaining 10%, rather than come up with the usual 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to loan you a piece of his own equity to help you get your down payment funds. In this scenario, you would borrow the largest portion of the purchase price from a traditional lender and finance the remaining amount with the seller. Typically you'll pay a slightly higher interest rate on the loan from the seller.
No matter your method of pulling together your down payment funds, the thrill of living in your own home will be just as sweet!
Want to discuss down payment options? Call us: 248-644-1200.
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