Putting Together Your Down Payment

Many borrowers can easily qualify for a loan, but they don't have a lot of money to put up a down payment. Want to buy a new home, but aren't sure how you should put together your down payment?

Tighten your belt and save. Scrutinize your budget to discover ways you can cut expenses to go toward your down payment. You could also try enrolling in an automatic savings plan at your bank to have a portion of your payroll automatically transferred into a savings account. Some practical ways to save additional funds include moving into less expensive housing, and skipping a year's vacation.

Work more and sell items you don't need. Try to find a second job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the things you can put up for sale. A closetful of small items could add up to a fair amount at a garage or tag sale. Also, you might want to consider selling any investments you own.

Tap into your retirement funds. Investigate the provisions of your specific plan. Some people get down payment money from withdrawing funds from their IRAs or taking money out of their 401(k) plans. Be sure you understand about any penalties, the way this may affect on income taxes, and repayment terms.

Request a generous gift from family. Many buyers are often fortunate enough to get down payment assistance from caring parents and other family members who are willing to help them get into their own home. Your family members may be inclined to help you reach the goal of owning your first home.

Contact housing finance agencies. Special mortgate loan programs are given to buyers in specific circumstances, such as low income homebuyers or buyers planning to improve homes in a particular area, among others. Financing through a housing finance agency, you can be given a below market interest rate, down payment help and other incentives. These types of agencies may help eligible buyers with a reduced interest rate, help with your down payment, and provide other benefits. These non-profit agencies were formed to build up community in particular areas.

Research no-down and low-down mortgages.

  • FHA mortgages

    The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income families qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting home financing. FHA offers mortgage insurance to the private lenders, helping the buyers to become eligible for financing. Interest rates with an FHA mortgage are usually the market interest rate, while the down payment amounts for an FHA loan are smaller than those of conventional loans. The required down payment can go as low as 3 percent while the closing costs might be covered by the mortgage loan.

  • VA mortgage loans

    VA loans are backed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a low fixed rate of interest, no down payment, and minimal closing costs. Although the mortgage loans are not actually financed by the VA, the office certifies borrowers by issuing eligibility certificates.

  • Piggy-back loans

    You can fund a down payment using a second mortgage that closes with the first. Often the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The borrower covers the remaining 10%, rather than needing to pull together the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" situation, the seller commits to loan you some of his home equity to help you get 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'll pay a somewhat higher rate on the loan financed by the seller.

The feeling of accomplishment will be the same, no matter how you manage to come up with your down payment. Your brand new home will be your reward!

Want to discuss your down payment? Give us a call at 708.966.9005.

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