Your Down Payment
Many buyers can qualify for a loan, but they can't afford a large down payment. Start here
Cut expenses and save. Turn your budget inside out to find extra money to save for your down payment. There are bank programs in which a portion of your take-home pay is automatically deposited into savings 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. Here are a couple of examples: you may move into less expensive housing, or skip a vacation.
Work more and sell items you do not need. Perhaps you can find a second job and build up your earnings. You can also get creative about the items you can put up for sale. Multiple small items might add up to a nice sum at a garage or tag sale. You might also look into what your investments will bring if sold.
Borrow from a retirement plan. Check the provisions of your particular plan. Many homebuyers get down payment money by withdrawing from IRAs or borrowing from 401(k) plans. Be sure you comprehend the tax consequences, repayment terms, and early withdrawal penalties.
Ask for a gift from your family. First-time buyers are sometimes fortunate enough to get down payment help from thoughtful family members who are willing to help them get into their own home. Your family members may be pleased at the chance to help you reach the goal of owning your first home.
Contact housing finance agencies. These types of agencies extend special mortgage programs to moderate and low income buyers, buyers with an interest in renovating a residence within a targeted part of the city, and other certain kinds of buyers as specified by the agency. With the help of a housing finance agency, you probably will be given an interest rate that is below market, down payment assistance and other incentives. These kinds of agencies can help you with a lower interest rate, help with your down payment, and offer other benefits. These non-profit programs exist to build up community in certain neighborhoods.
Explore no-down and low-down mortgages.
- 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 part in helping low and moderate-income individuals qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting home financing.
FHA assists first-time homebuyers and others who may not be able to qualify for a traditional mortgage on their own, by offering mortgage insurance to the lenders.
Interest rates with an FHA loan usually feature the market interest rate, but the down payment requirements with an FHA mortgage will be smaller than those of conventional loans. The required down payment can go as low as 3 percent and the closing costs can be included in the mortgage loan.
- VA loans
Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This special loan requires no down payment, has reduced closing costs, and provides the advantage of a competitive interest rate. Although the VA doesn't issue the loans, it does issue a certificate of eligibility to apply for a VA loan.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes at the same time as the first. Generally the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Instead of the usual 20 percent down payment, the buyer just has to pull together the remaining 10 percent.
- Carry-Back loans
We a seller carries back a second mortgage, the seller loans you part of his or her home equity. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remainder with the seller. Often, this kind of second mortgage will have a higher rate of interest.
The satisfaction will be the same, no matter which strategy you use to come up with the down payment. Your brand new home will be well worth it!
Need to talk about your down payment? Give us a call: 248-644-1200.
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