Building Your Down Payment

Lots of folks who are looking to buy a new home can qualify for various loan programs, but they can't afford a large down payment. Here are a few methods that will help you put together your down payment

Cut expenses and save. Look for ways to reduce your expenses to set aside money for a down payment. Also, you can look into bank programs in which some of your paycheck is automatically deposited into savings each pay period. Some effective ways to put together funds include moving into less expensive housing, and skipping a year's vacation.

Work more and sell things you do not need. Perhaps you can get a second job and build up your earnings. You can also seriously consider the possessions you actually need and the items you may be able to put up for sale. A closetful of small things could add up to a nice sum at a garage or tag sale. Also, you might want to think about selling any investments you hold.

Tap into retirement funds. Investigate the parameters of your particular plan. You may borrow funds from a 401(k) for a down payment or withdraw from an Individual Retirement Account. Be sure to ask your plan representative about the tax ramifications, your obligation for repaying the money, and any penalties for withdrawing early.

Request a generous gift from family. Many homebuyers somtimes get help with their down payment assistance from caring parents and other family members who are able to help them get into their own home. Your family members may be eager to help you reach the goal of buying your own home.

Contact housing finance agencies. Provisional mortgate loan programs are offered to homebuyers in specific situations, such as low income buyers or buyers planning to remodel houses in a specific neighborhood, among others. With the help of this type of agency, you can be given an interest rate that is below market, down payment help and other perks. Housing finance agencies may assist you with a reduced interest rate, help with your down payment, and offer other advantages. The primary goal of not-for-profit housing finance agencies is to promote residence ownership in particular places.

Learn about low-down and no-down mortgage loan programs.

  • 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 mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, enabling homebuyers who might not qualify for a conventional mortgage loan, to get home financing. Interest rates for an FHA mortgage usually feature the going interest rate, but the down payment requirements for an FHA mortgage are lower than those of conventional loans. The required down payment may go as low as 3 percent and the closing costs can be included in the mortgage.

  • VA loans

    With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This particular loan requires no down payment, has limited closing costs, and offers a competitive rate of interest. Although the VA does not actually finance the mortgage loans, it does certify eligibility to apply for a VA loan.

  • Piggy-back loans

    You may finance your down payment with a second mortgage that closes along with the first. In most cases the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. The borrower covers the remaining 10%, instead of putting the typical 20% down payment.

  • Carry-Back loans

    In a "carry back" mortgage, the seller commits to lend you a portion of his home equity to help you get your down payment funds. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lender and borrow the remainder from the seller. Often, this kind of second mortgage will have a higher rate of interest.

No matter your method of pulling together down payment funds, 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 954.920.9799.

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