Building Your Down Payment

Lots of borrowers can easily qualify for a loan, but they don't have much to put up the standard down payment. Want to buy a new home, but aren't sure how you should put together a down payment?

Tighten your belt and save. Turn your budget inside out to uncover ways you can cut expenses to go toward your down payment. You may also decide to enroll in an automatic savings plan at your bank to automatically have a predetermined amount from your paycheck transferred into your savings account. You might look into some big expenses in your budget that you can do without, or trim, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a vacation.

Sell items you do not really need and find a part-time job. Perhaps you can get a second job to get your down payment money. In addition, you can put together an exhaustive list of items you may be able to sell. Unused gold jewelry can be sold at local jewelry stores. A closetful of small things can add up to a nice sum at a garage or tag sale. You might also explore what your investments could sell for.

Borrow from retirement funds. Research the details of your individual plan. You may borrow money from a 401(k) for you down payment or perform a withdrawal from an IRA. Be sure you understand about any penalties, the effect this could have on your taxes, and repayment terms.

Ask for help from family members. Many homebuyers somtimes get down payment assistance from giving parents and other family members who may be anxious to help get them in their own home. Your family members may be inclined to help you reach the goal of having your own home.

Contact housing finance agencies. These agencies offer provisional mortgage loans to moderate and low income homebuyers, buyers interested in rehabilitating a residence in a particular area, and other certain types of buyers as specified by the finance agency. Financing through a housing finance agency, you probably will get an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies may help eligible homebuyers with a lower interest rate, help with your down payment, and provide other benefits. The central goal of non-profit housing finance agencies is to boost residence ownership in particular areas.

Find out about low-down and no-down mortgage loan programs.

  • FHA mortgage 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 and moderate-income buyers get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who may not be able to qualify for a conventional loan by themselves, by offering mortgage insurance to lenders. Down payment amounts for FHA loans are below those of typical mortgage loans, even though these mortgages hold current rates of interest. Closing costs may be financed in the mortgage, while the down payment can be as low as 3% of the total amount.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This particular loan requires no down payment, has mimimal closing costs, and provides a competitive interest rate. Although the VA doesn't issue the mortgage loans, it does issue a certificate of eligibility to qualify for a VA loan.

  • Piggy-back loans

    You may fund a down payment through a second mortgage that closes along with the first. Most of the time, the piggyback loan is for 10 percent of the purchase price, while the first mortgage finances 80 percent. The homebuyer covers the remaining 10%, instead of needing to pull together the typical 20% down payment.

  • Carry-Back loans

    In a "carry back" mortgage, the seller agrees to lend you a piece of his own 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 lender and finance the remaining amount with the seller. Typically you will pay a somewhat higher interest rate on the loan financed by the seller.

The feeling of accomplishment will be the same, no matter how you manage to come up with the down payment. Your new home will be your reward!

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

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