Putting Together Your Down Payment
Lots of folks who would like to purchase a new house can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Here's where to get started
Tighten your belt and save. Look for ways you can reduce your expenses to put away money for a down payment. Also, you can look into bank programs through which a specific portion of your take-home pay is automatically deposited into a savings account each pay period. 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 might move into less expensive housing, or skip a vacation.
Work a second job and sell things you do not need. Look for a second job. This can be rough, but the temporary trial can provide your down payment money. You can also get creative about the things you may be able to sell. You may own collectibles you can put up for sale at an auction website, or quality household items for a tag or garage sale. You might also look into what any investments you have could sell for.
Borrow your down payment from your retirement plan. Check the parameters of your particular program. Many homebuyers get down payment money from withdrawing from their IRAs or borrowing from their 401(k) programs. Make sure you comprehend the tax ramifications, your obligation for repaying funds, and possible early withdrawal penalties.
Ask for a gift from your family. Many buyers are sometimes lucky enough to get help with their down payment help from giving parents and other family members who may be able to help them get into their first home. Your family members may be inclined to help you reach the goal of having your first home.
Research housing finance agencies. Provisional mortgage loans are extended to homebuyers in certain situations, like low income buyers or buyers planning to renovating houses in a certain area, among others. With the help of this type of agency, you probably will be given a below market interest rate, down payment help and other benefits. Housing finance agencies may help you with a reduced rate of interest, help with your down payment, and provide other benefits. These non-profit agencies exist to boost the value of homes in specific areas.
Research no-down and low-down mortgage loans.
- Federal Housing Administration (FHA) loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in assisting low and moderate-income individuals qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to qualify for mortgages.
FHA provides mortgage insurance to the private lenders, making the buyers eligible for a mortgage.
Interest rates with an FHA loan are generally the going interest rate, while the down payment requirements for an FHA mortgage will be smaller than those of conventional loans. Closing costs can be included in the mortgage, and your down payment might be as low as 3% of the total.
- VA mortgage loans
With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This specialized loan does not require a down payment, has mimimal closing costs, and provides a competitive rate of interest. While the VA doesn't actually provide the loans, it does certify eligibility to qualify for a VA mortgage.
- Piggy-back loans
You may finance a down payment using a second mortgage that closes with the first. Usually the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage covers 80 percent. Instead of the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.
- Carry-Back loans
We a seller carries back a second mortgage, the you borrow a portion of the seller's home equity.. In this scenario, you would finance the largest portion of the purchase price with a traditional lending institution and borrow the remaining amount from the seller. Generally, this kind of second mortgage will have a higher rate of interest.
The satisfaction will be the same, no matter which approach you use to put together your down payment. Your brand new home will be your reward!
Want to discuss down payments? Give us a call: 205-941-1484.