Building Your Down Payment

Lots of buyers can qualify for a mortgage loan, but they can't afford a large down payment. Do you want to look into getting a new house, but don't know how you should put together your down payment?

Slash the budget and build up savings. Be on the look-out for ways to trim your expenses to put away money for a down payment. You may also decide to enroll in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay deposited into your savings account. Some effective ways to put together funds include moving into less expensive housing, and skipping a year's vacation.

Work more and sell items you don't need. Perhaps you can find an additional job and build up your earnings. You can also get serious about the possessions you actually need and the items you can put up for sale. A closetful of small items can add up to a fair amount at a garage or tag sale. You can also look into what any investments you hold may sell for.

Borrow funds from a retirement plan. Explore the details for your individual plan. It is possible to pull out funds from a 401(k) for a down payment or withdraw from an Individual Retirement Account. Be sure to find out about the tax ramifications, repayment terms, and possible penalties for withdrawing early.

Ask for help from generous members of your family. First-time buyers are often fortunate enough to get help with their down payment assistance from giving parents and other family members who may be willing to help them get into their own home. Your family members may be inclined to help you reach the goal of owning your own home.

Research housing finance agencies. Special mortgage loans are extended to homebuyers in specific situations, like low income buyers or buyers planning to renovating houses in a certain neighborhood, among others. Financing through a housing finance agency, you may get an interest rate that is below market, down payment help and other benefits. These kinds of agencies can help eligible buyers with a lower interest rate, help with your down payment, and provide other advantages. These non-profit agencies were established to promote the value of homes in certain places.

Explore no-down and low-down mortgage loan programs.

  • Federal Housing Administration (FHA) mortgage loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a vital part in aiding low to moderate-income individuals qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in qualifying for home financing. FHA aids first-time homebuyers and others who might not be eligible for a conventional mortgage on their own, by offering mortgage insurance to the private lenders. Interest rates with an FHA loan usually feature the going interest rate, but the down payment amounts with an FHA loan are lower than those of conventional loans. The down payment may go as low as three percent while the closing costs could be financed in the mortgage loan.

  • VA mortgage loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people are eligible for a VA loan, which generally offers a low fixed rate of interest, no down payment, and limited closing costs. Even though the VA does not actually provide the loans, it does issue a certificate of eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You can finance your down payment using a second mortgage that closes with the first. Most of the time, the first mortgage is for 80% of the purchase amount and the "piggyback" funds 10%. Rather than the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to lend you some of his own equity to help you get your down payment money. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Often, this kind of second mortgage will have higher interest.

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

Need to talk about down payments? Call us at 504-866-5626.

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