Your Down Payment
Many people who would like to buy a new house can qualify for various loan programs, but they don't have a large sum of cash to pay the standard down payment. Below are a few ways to put together a down payment
Tighten your belt and save. Be on the look-out for ways to reduce your expenditures 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 moved into savings. You would be wise to look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a family vacation.
Work more and sell items you do not need. Maybe you can get an additional job to get your down payment money. You can also get creative about the things you may be able to sell. Multiple small things could add up to a fair amount at a garage or tag sale. You might also research what your investments may sell for.
Tap into your retirement funds. Check the parameters of your specific plan. It is possible to pull out money from a 401(k) plan for a down payment or withdraw from an IRA. Be sure you understand about any penalties, the effect this will have on income taxes, and repayment terms.
Ask for a generous gift from family. Many buyers are sometimes lucky enough to receive help with their down payment help from caring parents and other family members who are able to help them get into their own home. Your family members may be eager to help you reach the goal of buying your first home.
Research housing finance agencies. Special mortgage loans are provided to buyers in certain circumstances, like low income buyers or future homeowners looking to remodel homes in a particular neighborhood, among others. Working through a housing finance agency, you probably will be given an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies can assist you with a lower interest rate, get you your down payment, and provide other advantages. The main goal of non-profit housing finance agencies is promoting the purchase of homes in targeted parts of the city.
Explore no-down and low-down mortgage loans.
- Federal Housing Administration (FHA) mortgages
The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in helping low to moderate-income Americans qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgages.
FHA aids first-time buyers and others who might not be eligible for a typical loan by themselves, by providing mortgage insurance to the lenders.
Interest rates for an FHA loan typically feature the going interest rate, but the down payment with an FHA mortgage will be lower than those of conventional loans. The down payment may go as low as three percent and the closing costs could be covered by the mortgage.
- VA mortgages
VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which typically offers a reasonable rate of interest, no down payment, and limited closing costs. While the VA does not finance the loans, it does certify eligibility to apply for a VA mortgage.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close with the first. Generally the piggyback loan takes care of 10 percent of the home's price, while the first mortgage finances 80 percent. Instead of the traditional 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.
- Carry-Back loans
With a carry-back mortgage, the seller loans you part of his or her home equity. 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. Usually this form of second mortgage has a higher rate of interest.
The feeling of accomplishment will be the same, no matter how you manage to pull together your down payment. Your new home will be well worth it!
Need to talk about the best options for down payments? Give us a call at 720-598-8300.