Putting Together Your Down Payment
Many folks who would like to buy a new house qualify for various loan programs, but they can't afford a large down payment. Want to look into getting a new home, but don't know how to get together your down payment?
Cut expenses and save. Scrutinize your budget to discover ways you can cut expenses to save for your down payment. You might also try enrolling in an automatic savings plan at your bank to have a percentage of your payroll automatically transferred into savings. You could look into some big expenses in your spending history that you can do without, or trim, at least temporarily. For example, you might move into less expensive housing, or skip a vacation.
Work more and sell items you don't need. Perhaps you can get an additional job to get your down payment money. In addition, you can make a comprehensive list of items you can sell. Unused gold jewelry can bring a good price from local jewelry stores. A closetful of small items might add up to a nice sum at a garage or tag sale. You might also explore what any investments you have may bring if sold.
Borrow from retirement funds. Explore the specifics of your individual plan. You can take out money from a 401(k) plan for you down payment or get a withdrawal from an Individual Retirement Account. Be sure you understand about any penalties, the effect this will have on income taxes, and repayment obligation.
Ask for a generous gift from your family. First-time homebuyers are often lucky enough to get down payment assistance from gracious family members who are prepared to help get them in their own home. Your family members may be eager to help you reach the goal of owning your first home.
Research housing finance agencies. These agencies extend provisional mortgage programs to low and moderate-income buyers, buyers with an interest in sprucing up a residence within a specific area, and additional groups as specified by the finance agency. Working with this kind of agency, you probably will get a below market interest rate, down payment help and other perks. Housing finance agencies may assist eligible homebuyers with a reduced interest rate, get you your down payment, and offer other advantages. The primary purpose of non-profit housing finance agencies is promoting the purchase of homes in particular parts of the city.
Research no-down and low-down mortgage loans.
- Federal Housing Administration (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 assisting low and moderate-income Americans qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get
FHA aids first-time buyers and others who would not be able to qualify for a traditional loan by themselves, by providing mortgage insurance to the lenders.
Down payment amounts for FHA loans are smaller than those of typical mortgage loans, even though these mortgages come with current rates of interest. The down payment may be as low as 3 percent and the closing costs might be covered by the mortgage loan.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan assists service people and veterans. This specialized loan requires no down payment, has mimimal closing costs, and provides the advantage of a competitive rate of interest. While the mortgage loans don't originate from 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. Generally the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage finances 80 percent. In contrast to the traditional 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" agreement, the seller agrees to lend you a portion of his home equity to help you get your down payment funds. In this scenario, you would borrow the majority of the purchase price from a traditional mortgage lending institution and finance the remainder with the seller. Generally, this type of second mortgage has higher interest.
The feeling of accomplishment will be the same, no matter how you manage to come up with your down payment. Your brand new home will be your reward!
Need to talk about down payments? Call us at (973) 601-2122.