Building Your Down Payment

Lots of buyers can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Start here

Slash your budget and build up savings. Turn your budget upside-down to uncover extra money to save for your down payment. Also, you can look into bank programs in which a portion of your paycheck is automatically placed into savings every pay period. Some practical methods to save additional funds include moving into less expensive housing, and skipping your family vacation for a year or two.

Sell items you do not need and find a part-time job. Maybe you can get an additional job to get your down payment money. You can also get creative about the items you can put up for sale. A closetful of small items may add up to a nice sum at a garage or tag sale. You could also research what any investments you hold could sell for.

Borrow from retirement funds. Investigate the provisions of your particular program. Many homebuyers get down payment money by withdrawing funds from their Individual Retirement Accounts or getting funds out of 401(k) plans. Make sure to find out about the tax ramifications, repayment terms, and penalties for withdrawing early.

Request a generous gift from family. Many homebuyers are sometimes fortunate enough to receive help with their down payment help from gracious family members who are prepared to help them get into their own home. Your family members may be inclined to help you reach the milestone of buying your own home.

Contact housing finance agencies. These agencies extend special mortgage programs to moderate and low income borrowers, buyers interested in rehabilitating a house within a specific area, and other groups as defined by the agency. Working through a housing finance agency, you may get an interest rate that is below market, down payment assistance and other perks. Housing finance agencies can help you with a reduced interest rate, help with your down payment, and provide other advantages. These non-profit agencies to build up home ownership in specific areas.

Learn about low-down and no-down mortgage loans.

• Federal Housing Administration (FHA) loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in aiding low to moderate-income buyers get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to qualify for mortgage loans. FHA helps first-time buyers and others who might not be able to qualify for a traditional mortgage loan on their own, by providing mortgage insurance to the private lenders. Interest rates for an FHA loan typically feature the market interest rate, while the down payment amounts for an FHA loan are less than those of conventional loans. The down payment can be as low as 3 percent and the closing costs may be covered by the mortgage loan.

• VA mortgages

  Guaranteed by the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This specialized loan does not require a down payment, has limited closing costs, and provides a competitive rate of interest. Although the VA doesn't finance the mortgage loans, it does issue a certificate of eligibility to apply for a VA loan.

• Piggy-back loans

  You may finance a down payment with a second mortgage that closes along with the first. Generally 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 cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to lend you a portion of his own equity to help you with your down payment funds. You would finance the majority of the purchase price with a traditional mortgage lender and finance the remainder with the seller. Typically, this type of second mortgage has higher interest.

Need to talk about the best options for down payments? Call us at 9722039033.