Your Down Payment

Many borrowers can qualify for a mortgage loan, but they can't afford a large down payment. Get started here

Reduce expenses and save. Scrutinize the budget to uncover extra money to save for your down payment. There are bank programs in which a specific portion of your paycheck is automatically placed into savings every pay period. You would be wise to look into some big expenses in your budget that you can live without, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or stay close to home for your vacation.

Sell things you do not need and get a part-time job. Try to get a second job. This can be rough, but the temporary difficulty can help you get your down payment. You can also get creative about the items you may be able to put up for sale. Multiple small items might add up to a fair amount at a garage or tag sale. You can also look into what your investments could bring if sold.

Borrow money from a retirement plan. Research the specifics for your individual plan. You may pull out funds from a 401(k) plan for you down payment or withdraw from an IRA. Make sure you understand the tax consequences, repayment terms, and any penalties for withdrawing early.

Ask for a generous gift from family. Many buyers are often lucky enough to receive help with their down payment assistance from caring parents and other family members who are prepared to help them get into their first home. Your family members may be willing to help you reach the goal of owning your first home.

Research housing finance agencies. These agencies provide provisional mortgage programs for low and moderate-income homebuyers, buyers interested in renovating a residence in a particular part of the city, and additional specific kinds of buyers as specified by each finance agency. Working with a housing finance agency, you probably will get an interest rate that is below market, down payment help and other incentives. Housing finance agencies may assist eligible buyers with a reduced rate of interest, get you your down payment, and offer other advantages. These non-profit programs were established to boost home ownership in specific neighborhoods.

Learn about low-down and no-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 an important role in helping low to moderate-income individuals get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, enabling new homebuyers who may not be eligible for a conventional loan, to get a mortgage. Interest rates for an FHA mortgage usually feature the current interest rate, while the down payment requirements for an FHA mortgage are below those of conventional loans. The required down payment can go as low as 3 percent while the closing costs could be included in the mortgage.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This specialized loan requires no down payment, has reduced closing costs, and provides the benefit of a competitive interest rate. Even though the mortgages aren't actually provided by the VA, the office certifies applicants by issuing eligibility certificates.

  • Piggy-back loans

    You can fund a down payment using a second mortgage that closes at the same time as the first. Generally the piggyback loan is for 10 percent of the purchase amount, while the first mortgage covers 80 percent. The homebuyer pays the remaining 10%, instead of having to put together the usual 20% down payment.

  • Carry-Back loans

    In the case of a seller "carrying back a second mortgage," the seller loans you part of his or her equity. You would finance the majority of the purchase price with a traditional lending institution and borrow the remainder from the seller. Usually you'll pay a somewhat higher interest rate on the loan financed by the seller.

The feeling of accomplishment will be the same, no matter which approach you use to pull together your down payment. Your brand new home will be well worth it!

Want to discuss your down payment? Call us at (512) 422-9036.

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