Building Your Down Payment

Many borrowers can easily qualify for a mortgage loan, but they don't have a lot of money to pay the standard down payment. Below are a few ways to put together your down payment

Slash your budget and build up savings. Look for ways you can reduce your monthly expenses to save toward a down payment. You could also try enrolling in an automatic savings plan at your bank to have a portion of your pay automatically transferred into savings. You might look into some big expenses in your spending history that you can live without, or trim, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay local for your family vacation.

Work a second job and sell things you don't need. Try to find a second job. This can be rough, but the temporary difficulty can help you get your down payment. You can also seriously consider the possessions you actually need and the things you may be able to sell. Multiple small items can add up to a nice sum at a garage or tag sale. You can also explore what any investments you own will bring if sold.

Borrow from a retirement plan. Research the details of your particular plan. You may pull out funds from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Be sure you are clear about any penalties, the way this could affect on income taxes, and repayment terms.

Ask for help from members of your family. First-time homebuyers somtimes get down payment assistance from giving parents and other family members who are able to help get them in their first home. Your family members may be eager to help you reach the milestone of owning your own home.

Research housing finance agencies. Special mortgage loans are extended to homebuyers in certain circumstances, like low income homebuyers or buyers planning to renovating houses in a targeted neighborhood, among others. With the help of this kind of agency, you can receive a below market interest rate, down payment help and other incentives. Housing finance agencies can help eligible buyers with a lower interest rate, get you your down payment, and offer other benefits. The principal purpose of non-profit housing finance agencies is build up residence ownership in certain parts of the city.

Learn about low-down and no-down mortgage loan programs.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in helping low and moderate-income buyers get mortgages. An office of the United States 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 will not qualify for a typical loan, to obtain a mortgage. Down payment amounts for FHA mortgages are smaller than those of traditional mortgage loans, even though these mortgages come with current interest rates. The required down payment can go as low as three percent while the closing costs can be financed in the mortgage.

• VA mortgages

  Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan requires no down payment, has reduced closing costs, and provides the advantage of a competitive rate of interest. While the mortgage loans don't originate from the VA, the department certifies applicants by providing eligibility certificates.

• Piggy-back loans

  You can finance your down payment with a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan takes care of 10 percent of the home's amount, while the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, instead of having to pull together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller commits to lend you a portion of his home equity to help you with your down payment funds. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually you will pay a somewhat higher interest rate with the loan from the seller.

Need to talk about down payment options? Give us a call at (818)645-7035.