Putting Together Your Down Payment

Lots of buyers can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Here are a few tips:

Tighten your belt and save. Turn your budget inside out to find extra money to save for your down payment. You might also decide to enroll in an automatic savings plan to automatically have a set portion of your take-home pay moved into a savings account. You might look into some big expenses in your budget that you can do without, or trim, at least temporarily. For example, you might decide to move into less expensive housing, or stay local for your family vacation.

Work more and sell items you do not need. Perhaps you can get a second job to get your down payment money. Additionally, you can make an exhaustive inventory of things you can sell. Broken gold jewelry can bring a good amount from local jewelry stores. Multiple small things can add up to a fair amount at a garage or tag sale. Also, you can look into selling any investments you hold.

Tap into your retirement funds. Check the provisions of your retirement program. Many homebuyers get down payment money by withdrawing funds from their IRAs or taking funds out of 401(k) plans. Be sure you understand the tax consequences, your obligation for repayment, and early withdrawal penalties.

Ask for help from generous family members. First-time buyers are sometimes lucky enough to receive help with their down payment assistance from caring parents and other family members who may be eager to help them get into their first home. Your family members may be willing to help you reach the goal of owning your own home.

Contact housing finance agencies. Special mortgage loans are offered to buyers in specific situations, such as low income purchasers or buyers planning to renovating houses in a certain area, among others. Working with a housing finance agency, you probably will get an interest rate that is below market, down payment help and other perks. Housing finance agencies can help you with a reduced rate of interest, get you your down payment, and provide other benefits. These non-profit programs exist to build up home ownership in specific neighborhoods.

Explore no-down and low-down mortgages.

• Federal Housing Administration (FHA) mortgage loans

  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 and moderate-income Americans get mortgage loans. Part 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 might not be eligible for a conventional loan on their own, by providing mortgage insurance to the lenders. Interest rates for an FHA loan are normally the market interest rate, but the down payment requirements for an FHA loan will be lower than those of conventional loans. The down payment can be as low as 3 percent and the closing costs may be financed in the mortgage loan.

• VA mortgages

  With a guarantee from the Department of Veterans Affairs, a VA loan assists veterens and service people. This particular loan does not require a down payment, has mimimal closing costs, and provides a competitive rate of interest. Although the VA does not issue the loans, it does certify eligibility to apply 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. Generally the piggyback loan is for 10 percent of the home's amount, while the first mortgage covers 80 percent. In contrast to the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to loan you a piece of his own equity to help you with your down payment money. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Typically, this type of second mortgage will have a higher rate of interest.

Want to discuss down payment options? Call us: 817-431-8618.