Building Your Down Payment

Lots of buyers qualify for a mortgage loan, but they can't afford a large down payment. Here are a few methods that will help you get together a down payment

Tighten your belt and save. Look for ways to trim your expenditures to put away money for a down payment. Also, you can look into bank programs in which a specific portion of your take-home pay is automatically deposited into a savings account each pay period. You might look into some big expenses in your budget that you can live without, or trim, at least temporarily. For example, you might move into less expensive housing, or stay local for your vacation.

Work a second job and sell things you do not need. Try to find an additional job. This can be exhausting, but the temporary trial can provide your down payment money. You can also get serious about the possessions you really need and the things you migh be able to sell. You may own desirable items you can sell at an auction website, or quality household goods for a garage or tag sale. You could also research what your investments will bring if sold.

Borrow from retirement funds. Research the specifics of your individual plan. You can borrow money from a 401(k) plan for you down payment or withdraw from an Individual Retirement Account. Make sure you understand the tax ramifications, repayment terms, and possible early withdrawal penalties.

Ask for a generous gift from your family. Many homebuyers are sometimes lucky enough to get down payment help from giving family members who are eager to help get them in their first home. Your family members may be eager to help you reach the milestone of owning your first home.

Learn about housing finance agencies. Special mortgage loans are provided to homebuyers in certain situations, like low income purchasers or homebuyers looking to remodel houses in a certain part of town, among others. Working with a housing finance agency, you may get a below market interest rate, down payment assistance and other perks. Housing finance agencies can help eligible homebuyers with a reduced interest rate, help with your down payment, and offer other benefits. The principal purpose of non-profit housing finance agencies is build up residence ownership in specific areas.

Find out about low-down and no-down mortgage loan programs.

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in aiding low to moderate-income buyers qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who need to qualify for home financing. FHA aids first-time buyers and others who would not be eligible for a traditional mortgage by themselves, by offering mortgage insurance to the private lenders. Interest rates with an FHA loan are generally the current interest rate, while the down payment for an FHA loan will be lower than those of conventional loans. The required down payment may be as low as 3 percent while the closing costs might be included in the mortgage loan.

  • VA loans

    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 reduced closing costs, and offers a competitive interest rate. Even though the VA does not finance the mortgages, it does issue a certificate of eligibility to apply for a VA mortgage.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close with the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. In contrast to the usual 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 agrees to loan you a piece of his own equity to assist you with your down payment money. You would finance the largest portion of the purchase price with a traditional lending institution and borrow the remainder from the seller. Typically, this form of second mortgage has higher interest.

No matter how you gather your down payment, the thrill of living in your own home will be just as great!

Need to talk about your down payment? Call us at (718) 477-4405.

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