Putting Together Your Down Payment

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Putting Together Your Down Payment

DOWN PAYMENT: THINGS YOU CAN DO

Many folks who are looking to purchase a new home qualify for several different kinds of mortgages, but they can’t afford a large down payment. Want to look into getting a new house, but don’t know how you should get together a down payment?

Cut expenses and save. Look for ways to reduce your expenses to put away money for a down payment. You could also try enrolling in an automatic savings plan at your bank to have a percentage of your payroll automatically deposited into savings. You could look into some big expenses in your budget that you can live without, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or stay close to home for your family vacation.

Sell things you do not need and get a part-time job. Perhaps you can get a second job to get your down payment money. You can also get creative about the things you could be able to put up for sale. Multiple small items could add up to a fair amount at a garage or tag sale. You could also explore what your investments will sell for.

Borrow from your retirement plan. Research the details for your particular plan. Many homebuyers get down payment money from withdrawing what they need from their IRAs or borrowing from 401(k) programs. Be sure you are knowledgeable about any penalties, the way this could affect on income taxes, and repayment terms.

Ask for a generous gift from your family. Many homebuyers sometimes get help with their down payment assistance from giving parents and other family members who are able to help them get into their first home. Your family members may be inclined to help you reach the milestone of owning your own home.

Learn about housing finance agencies. Provisional mortgage programs are provided to buyers in specific situations, such as low-income homebuyers or people planning to renovating homes in a specific area, among others. With the help of a housing finance agency, you can get a below market interest rate, down payment assistance and other incentives. These kinds of agencies can help eligible buyers with a reduced rate of interest, get you your down payment, and offer other assistance. These non-profit programs exist to build up the value of homes in specific places.

Explore no-down and low-down mortgages.

  • Federal Housing Administration (FHA) loans
    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in assisting low and moderate-income buyers 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 offers mortgage insurance to private lenders, enabling new homebuyers who will not qualify for a conventional loan, to obtain financing. Interest rates for an FHA loan normally feature the current interest rate, but the down payment requirements for an FHA mortgage are below those of conventional loans. The down payment may go as low as three percent while the closing costs can be covered by the mortgage loan.
  • VA mortgages
    VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which usually offers a competitive rate of interest, no down payment, and limited closing costs. Although the VA doesn’t actually finance the mortgages, it does certify eligibility to qualify for a VA loan.
  • Piggy-back loans
    A piggy-back loan is a second mortgage that you close with the first. Often the first mortgage covers 80% of the purchase price and the “piggyback” is for 10%. Instead of the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.
  • Carry-Back loans
    With a carry-back mortgage, the seller loans you part of his or her home equity. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually this form of second mortgage will have higher interest.

No matter how you gather down payment funds, the satisfaction of reaching the goal of owning your own home will be just as sweet!

Need to talk about the best options for down payments?

Call us at 847-230-4030 or email us at loans@bluestarhm.com.