Building Your Down Payment

Lots of borrowers can qualify for various loan programs, but they can't afford a large down payment. Want to look into getting a new home, but aren't sure how to put together a down payment?

Slash your budget and build up savings. Scrutinize your budget to find extra money to go toward your down payment. You may also decide to enroll in an automatic savings plan to automatically have a specific amount from your paycheck transferred into your savings account. You would be wise to look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or skip a family vacation.

Sell things you do not need and find a part-time job. Try to find a second job. This can be rough, but the temporary trial can help you get your down payment. You can also get serious about the possessions you actually need and the items you migh be able to put up for sale. A closetful of small things can add up to a nice sum at a garage or tag sale. You might also research what any investments you hold could bring if sold.

Tap into retirement funds. Check the provisions of your retirement program. You can borrow money from a 401(k) plan for a down payment or withdraw from an IRA. Be sure to learn about the tax ramifications, repayment terms, and early withdrawal penalties.

Ask for assistance from generous members of your family. Many buyers somtimes receive down payment help from thoughtful family members who are prepared to help them get into their first home. Your family members may be pleased at the chance to help you reach the milestone of buying your own home.

Learn about housing finance agencies. These types of agencies provide special mortgage loans to low and moderate-income homebuyers, buyers with an interest in rehabilitating a house within a particular part of the city, and other groups as defined by each agency. With the help of this kind of agency, you may get a below market interest rate, down payment assistance and other benefits. Housing finance agencies may help eligible homebuyers with a lower rate of interest, get you your down payment, and provide other benefits. These non-profit programs exist to build up home ownership in particular places.

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 an important role in assisting low to moderate-income Americans get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time buyers and others who may not be able to qualify for a conventional mortgage on their own, by providing mortgage insurance to private lenders. Interest rates with an FHA mortgage are usually the current interest rate, while the down payment amounts with an FHA mortgage are lower than those of conventional loans. Closing costs may be covered by the mortgage, while your down payment might be as low as 3 percent of the purchase price.

  • VA loans

    With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This specialized loan requires no down payment, has limited closing costs, and provides a competitive rate of interest. Even though the VA does not actually provide the loans, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You can fund your down payment using a second mortgage that closes with the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, and the first mortgage covers 80 percent. Rather than the usual 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.

  • Carry-Back loans

    In the case of a seller "carrying back a second mortgage," the you borrow a portion of the seller's home equity.. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually this type of second mortgage has a higher rate of interest.

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

Want to discuss down payments? Call us: (718) 477-4405.

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