Building Your Down Payment

Lots of borrowers can qualify for several different kinds of mortgages, but they can't afford a large down payment. Here's where you start

Reduce expenses and save. Be on the look-out for ways to trim your monthly expenditures to put away money for a down payment. You also could enroll in an automatic savings plan at your bank to automatically have a predetermined portion of your paycheck deposited into savings. Some effective strategies to put together funds include moving into less expensive housing, and staying local for your vacation for a year or two.

Sell items you don't really need and find a second job. Try to find an additional job. This can be rough, but the temporary trial can provide your down payment money. You can also get creative about the things you migh be able to put up for sale. A closetful of small things may add up to a nice sum at a garage or tag sale. You might also explore what any investments you hold could bring if sold.

Borrow from a retirement plan. Check the parameters of your retirement program. You can borrow money from a 401(k) plan for you down payment or get a withdrawal from an Individual Retirement Account. You will need to make sure you are clear about any penalties, the effect this may have on taxes, and repayment terms.

Ask for assistance from family members. Many homebuyers are sometimes lucky enough to get help with their down payment assistance from caring family members who are eager to help them get into their own home. Your family members may be pleased to help you reach the goal of buying your first home.

Learn about housing finance agencies. Special mortgage loans are extended to buyers in specific situations, like low income homebuyers or people looking to renovating houses in a targeted part of town, among others. Working through this kind of agency, you can be given a below market interest rate, down payment help and other incentives. These types of agencies can help eligible buyers with a reduced rate of interest, get you your down payment, and offer other benefits. The central mission of not-for-profit housing finance agencies is build up the purchase of homes in particular areas.

Learn about low-down and no-down mortgages.

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in assisting low to moderate-income families qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time homebuyers and others who may not be able to qualify for a traditional loan by themselves, by offering mortgage insurance to the private lenders. Down payment requirements for FHA loans are smaller than those of traditional mortgages, even though these mortgages hold current rates of interest. Closing costs can be covered by the mortgage, and the down payment can be as low as 3 percent of the total amount.

  • VA mortgages

    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 reduced closing costs, and provides a competitive interest rate. While the mortgage loans aren't actually provided by the VA, the department certifies borrowers by issuing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Generally the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, rather than come up with 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 funds most of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Generally, this kind of second mortgage has a higher rate of interest.

No matter your method of getting together your down payment, the satisfaction of reaching the goal of living in your own home will be just as sweet!

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

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