Putting Together Your Down Payment
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Lots of people who are looking to purchase a new home can easily qualify for several different kinds of mortgages, but they don't have much to put up the standard down payment. Here are a few ideas:
Tighten your belt and save. Scrutinize the budget to uncover extra money to save for your down payment. You also could enroll in an automatic savings plan at your bank to have a percentage of your pay automatically deposited into savings. You would be wise to look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your family vacation.
Sell things you do not really need and find a part-time job. Try to get an additional job. This can be rough, but the temporary difficulty can provide your down payment money. In addition, you can put together a comprehensive inventory of things you can sell. Unworn gold jewelry can bring a good amount from local jewelers. Maybe you own collectibles you can sell on an online auction, or quality household goods for a tag or garage sale. Also, you might want to think about selling any investments you hold.
Borrow funds from a retirement plan. Explore the details for your individual plan. Some homebuyers get down payment money from withdrawing from Individual Retirement Accounts or borrowing from their 401(k) programs. Be sure to learn about the tax ramifications, your obligation for repaying the money, and any penalties for withdrawing early.
Ask for help from family members. Many buyers are often lucky enough to receive help with their down payment help from caring family members who may be anxious to help them get into their first home. Your family members may be willing to help you reach the goal of buying your own home.
Contact housing finance agencies. These types of agencies offer special mortgage loans to moderate and low income borrowers, buyers interested in rehabilitating a home in a targeted part of the city, and other groups as specified by each agency. With the help of this kind of agency, you can be given an interest rate that is below market, down payment help and other advantages. These types of agencies can assist you with a lower rate of interest, get you your down payment, and offer other advantages. The central goal of non-profit housing finance agencies is to promote residential ownership in certain parts of the city.
Research no-down and low-down mortgages.
- Federal Housing Administration (FHA) 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 individuals qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, enabling new homebuyers who may not be eligible for a conventional loan, to receive a mortgage. Down payment totals for FHA loans are below those for conventional mortgage loans, even though these mortgages come with average interest rates. Closing costs can be included in the mortgage, while your down payment may be as low as 3 percent of the purchase price.
- VA loans
VA loans are backed by the Department of Veterans Affairs. Veterens and service people can receive a VA loan, which usually offers a competitive interest rate, no down payment, and minimal closing costs. Even though the VA does not provide the mortgage loans, it does certify eligibility to apply for a VA loan.
- Piggy-back loans
You can fund a down payment through a second mortgage that closes with the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. The homebuyer covers the remaining 10%, rather than come up with the typical 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller commits to lend you some of his home equity to assist you with your down payment money. You would finance the majority of the purchase price with a traditional mortgage lender and finance the remainder with the seller. Usually you'll pay a slightly higher interest rate with the loan from the seller.
The feeling of accomplishment will be the same, no matter which method you use to come up with the down payment. Your new home will be well worth it!
Need to talk about the best options for down payments? Call us at (408) 292-5000.