Putting Together Your Down Payment

Many borrowers can easily qualify for a loan, but they can't afford a large down payment. Here are a few ideas:

Slash your budget and build up savings. Scrutinize your budget to uncover extra money to save for your down payment. You might also decide to enroll in an automatic savings plan to automatically have a predetermined amount from your paycheck deposited into savings. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you might move into less expensive housing, or skip a vacation.

Work a second job and sell things you do not need. Maybe you can get a second job and build up your earnings. You can also get creative about the things you can put up for sale. Maybe you own desirable items you can sell on an auction website, or household goods for a garage or tag sale. Also, you can look into selling any investments you own.

Borrow from retirement funds. Investigate the provisions of your specific program. It is possible to take out money from a 401(k) plan for a down payment or perform a withdrawal from an IRA. Make sure you are knowledgable about any penalties, the effect this will have on taxes, and repayment terms.

Ask for help from members of your family. Many buyers are often fortunate enough to get down payment assistance from gracious family members who may be eager to help get them in their first home. Your family members may be pleased to help you reach the goal of buying your first home.

Contact housing finance agencies. Special mortgate loan programs are extended to buyers in certain circumstances, such as low income purchasers or future homeowners planning to improve houses in a particular part of town, among others. With the help of this type of agency, you may be given a below market interest rate, down payment help and other incentives. These kinds of agencies can assist you with a reduced rate of interest, help with your down payment, and provide other advantages. These non-profit agencies exist to build up home ownership in certain places.

Explore no-down and low-down mortgage loans.

  • 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 role in helping low to moderate-income families qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who need to get mortgages. FHA helps first-time homebuyers and others who would not be eligible for a conventional loan by themselves, by offering mortgage insurance to private lenders. Interest rates for an FHA loan are normally the market interest rate, but the down payment with an FHA loan are smaller than those of conventional loans. Closing costs may be covered by the mortgage, while the down payment may be as low as 3 percent of the total amount.

  • VA mortgage loans

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which usually offers a low fixed interest rate, no down payment, and reduced closing costs. While the VA does not actually provide the mortgages, it does issue a certificate of eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. Rather than the traditional 20 percent down payment, the buyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In the case of a seller "carrying back a second mortgage," the you borrow part of the seller's home equity.. You would finance the largest portion of the purchase price with a traditional mortgage lending institution and finance the remaining amount with the seller. Usually you'll pay a slightly higher interest rate with the loan financed by the seller.

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

Need to talk about down payment options? Give us a call: 708.966.9005.

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