Your Down Payment
Many buyers qualify for several different kinds of mortgages, but they can't afford a large down payment. Do you want to buy a new house, but aren't sure how you should get together your down payment?
Tighten your belt and save. Look for ways you can reduce your expenditures to put away money for a down payment. Also, you can look into bank programs in which a portion of your take-home pay is automatically transferred into savings every pay period. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or skip a vacation.
Work a second job and sell things you do not need. Perhaps you can find a second job and build up your earnings. You can also get serious about the possessions you really need and the items you can sell. Multiple small things can add up to a fair amount at a garage or tag sale. You might also explore what any investments you hold may sell for.
Borrow your down payment from your retirement plan. Investigate the provisions of your specific program. Some people get down payment money by withdrawing from their IRAs or getting funds out of 401(k) plans. Be sure you understand the tax consequences, your obligation for repaying the money, and early withdrawal penalties.
Request a gift from family. Many homebuyers are sometimes lucky enough to get down payment assistance from caring family members who are willing to help get them in their own home. Your family members may be inclined to help you reach the goal of buying your own home.
Contact housing finance agencies. These agencies offer provisional loan programs for low and moderate-income homebuyers, buyers with an interest in rehabilitating a residence within a particular area, and other specific kinds of buyers as specified by the agency. Financing through a housing finance agency, you probably will get a below market interest rate, down payment help and other advantages. These types of agencies can assist eligible buyers with a lower interest rate, get you your down payment, and provide other benefits. The primary purpose of non-profit housing finance agencies is build up the purchase of homes in particular places.
Research no-down and low-down mortgage loans.
- Federal Housing Administration (FHA) mortgage loans
The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low and moderate-income families get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in getting home financing.
FHA offers mortgage insurance to private lenders, helping the buyers to become eligible for a mortgage loan.
Down payment sums for FHA mortgages are less than those for traditional mortgage loans, although these loans come with current interest rates. The down payment may go as low as three percent and the closing costs could 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 specialized loan does not require a down payment, has limited closing costs, and offers a competitive interest rate. Although the VA does not actually provide the mortgage loans, it does certify eligibility to apply for a VA mortgage.
- Piggy-back loans
You can fund a down payment using a second mortgage that closes along with the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The borrower pays the remaining 10%, rather than needing to pull together the usual 20% down payment.
- Carry-Back loans
In a "carry back" agreement, the seller commits to lend you a portion of his home equity to help you get your down payment funds. In this scenario, you would borrow the majority of the purchase price from a traditional lending institution and finance the remaining amount with the seller. Typically, this form of second mortgage will have a higher rate of interest.
The satisfaction will be the same, no matter how you manage to put together the down payment. Your new home will be your reward!
Need to talk about the best options for down payments? Call us at 708.966.9005.