Building Your Down Payment

Many buyers qualify for a loan, but they can't afford a large down payment. Below are a few straightforward ways to get together your down payment

Slash the budget and build up savings. Turn your budget inside out to find ways you can cut expenses to go toward your 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. Some practical methods to put together funds include moving into a residence that is less expensive, and skipping your family vacation for a year or two.

Work more and sell items you don't need. Look for a second job. This can be rough, but the temporary difficulty can help you get your down payment. You can also seriously consider the possessions you really need and the things you may be able to put up for sale. Maybe you have desirable items you can sell on an auction website, or household goods for a garage or tag sale. You could also explore what any investments you have will bring if sold.

Borrow your down payment from a retirement plan. Research the specifics of your individual plan. It is possible to borrow funds from a 401(k) plan for you down payment or make a withdrawal from an Individual Retirement Account. Make sure you understand about any penalties, the way this will affect on taxes, and repayment obligation.

Ask for a generous gift from family. Many homebuyers somtimes receive down payment assistance from giving family members who may be able to help them get into their own home. Your family members may be happy at the chance to help you reach the milestone of owning your first home.

Learn about housing finance agencies. Special loan programs are given to buyers in specific situations, like low income homebuyers or future homeowners looking to improve houses in a particular part of town, among others. With the help of a housing finance agency, you may be given a below market interest rate, down payment assistance and other advantages. Housing finance agencies can help you with a reduced rate of interest, get you your down payment, and offer other assistance. These non-profit agencies exist to build up community in specific neighborhoods.

Learn about low-down and no-down mortgages.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in aiding low to moderate-income individuals qualify for mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who wish to qualify for mortgages. FHA assists first-time buyers and others who may not be able to qualify for a conventional mortgage loan by themselves, by providing mortgage insurance to lenders. Down payment requirements for FHA mortgages are less than those for conventional mortgage loans, although these loans have current interest rates. Closing costs might be included in the mortgage, while the down payment could be as low as 3 percent of the purchase price.

  • VA loans

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This special loan does not require a down payment, has mimimal closing costs, and offers a competitive rate of interest. While it's true that the loans don't originate from the VA, the office verfifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    You can fund your down payment through a second mortgage that closes at the same time as the first. Usually the piggyback loan is for 10 percent of the home's amount, while the first mortgage covers 80 percent. Rather than the traditional 20 percent down payment, the buyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to lend you a portion of his home equity to assist you with your down payment funds. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and borrow the remaining amount from the seller. Typically you will pay a slightly higher interest rate with the loan financed by the seller.

The satisfaction will be the same, no matter which approach you use to pull together your down payment. Your brand new home will be your reward!

Want to discuss down payment options? Give us a call: (713) 528-1245.

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