Building Your Down Payment

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Many buyers can qualify for several different kinds of mortgages, but they can't afford a large down payment. Here are a few ideas:

Reduce expenses and save. Scrutinize your budget to find extra money to save for your down payment. You might also try enrolling in an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Some practical ways to build up funds include moving into housing that is less expensive, and staying local for your family vacation for a year or two.

Work a second job and sell things you don't need. Look for an additional job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the items you could be able to put up for sale. Maybe you have desirable items you can sell at an online auction, or quality household items for a tag or garage sale. You might also look into what your investments may bring if sold.

Tap into retirement funds. Explore the details for your individual plan. Some people get down payment money by withdrawing funds from their IRAs or borrowing from 401(k) plans. Be sure you are knowledgeable about any penalties, the effect this may have on your taxes, and repayment terms.

Ask for assistance from members of your family. Many homebuyers are often fortunate enough to get down payment help from gracious parents and other family members who are willing to help them get into their first home. Your family members may be pleased at the chance to help you reach the goal of owning your first home.

Research housing finance agencies. Provisional mortgage loan programs are extended to buyers in specific circumstances, like low income purchasers or homebuyers planning to renovating homes in a particular neighborhood, among others. Financing through this type of agency, you may be given a below market interest rate, down payment assistance and other incentives. These kinds of agencies may assist eligible homebuyers with a lower interest rate, get you your down payment, and provide other advantages. The central goal of non-profit housing finance agencies is to promote the purchase of homes in targeted parts of the city.

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

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a significant part in aiding low to moderate-income individuals get mortgage loans. An office 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, ensuring the buyers are eligible for a mortgage. Interest rates with an FHA loan are normally the current interest rate, while the down payment with an FHA loan will be below those of conventional loans. The down payment can go as low as 3 percent while the closing costs could be financed in the mortgage loan.

  • VA mortgages

    VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which typically offers a low rate of interest, no down payment, and reduced closing costs. Even though the VA doesn't actually finance the mortgages, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes along with the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage finances 80 percent. In contrast to the traditional 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller commits to lend you a piece of his own equity to help you with your down payment funds. The buyer funds most of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Typically, this kind of second mortgage has higher interest.

The satisfaction will be the same, no matter which method you use to come up with your down payment. Your brand new home will be well worth it!

Need to talk about the best options for down payments? Give us a call: 415-999-2439.

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