Building Your Down Payment
Lots of buyers can qualify for various loan programs, but they can't afford a large down payment. We have a few suggestions
Slash the budget and build up savings. Turn your budget upside-down to discover ways you can cut expenses to go toward your down payment. You also might enroll in an automatic savings plan to have a portion of your payroll automatically moved into savings. You could look into some big expenses in your spending history that you can live without, or trim, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a family vacation.
Sell things you don't really need and get a second job. Look for an additional job. This can be rough, but the temporary trial can provide your down payment money. Additionally, you can put together an exhaustive inventory of items you may be able to sell. Unused gold jewelry can bring a good price from local jewelers. Maybe you have collectibles you can put up for sale at an auction website, or quality household items for a tag or garage sale. Also, you can think about selling any investments you hold.
Tap into retirement funds. Research the specifics for your particular plan. Some homebuyers get down payment money from withdrawing from their IRAs or getting funds out of 401(k) plans. Make sure you understand about any penalties, the effect this will have on taxes, and repayment obligation.
Request a gift from family. Many buyers somtimes receive help with their down payment assistance from caring family members who may be prepared to help get them in their first home. Your family members may be inclined to help you reach the goal of buying your first home.
Research housing finance agencies. These types of agencies extend provisional loan programs to moderate and low income homebuyers, buyers with an interest in remodeling a residence within a specific area, and other groups as defined by the finance agency. Working through a housing finance agency, you may get a below market interest rate, down payment help and other advantages. These types of agencies can help you with a reduced interest rate, get you your down payment, and offer other advantages. These non-profit programs were formed to promote the value of homes in specific areas.
Research no-down and low-down mortgages.
- Federal Housing Administration (FHA) loans
The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low and moderate-income buyers qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to get home financing.
FHA provides mortgage insurance to the private lenders, helping the buyers to become eligible for a mortgage loan.
Down payment totals for FHA mortgages are lower than those with conventional mortgages, even though these loans have current interest rates. Closing costs can be included in the mortgage, while the down payment can be as low as 3% of the total amount.
- VA mortgages
VA loans are guaranteed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which generally offers a competitive fixed rate of interest, no down payment, and minimal closing costs. Although the VA does not actually finance the mortgages, it does issue a certificate of eligibility to apply for a VA mortgage.
- Piggy-back loans
You may finance your down payment using a second mortgage that closes at the same time as the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. In contrast to the usual 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" situation, the seller commits to loan you a piece of his own equity to help you get your down payment funds. You would borrow the majority of the purchase price from a traditional mortgage lending institution and borrow the remainder from the seller. Often, this kind of second mortgage will have a higher rate of interest.
No matter how you gather your down payment, the satisfaction of owning your own home will be just as sweet!
Want to discuss the best options for down payments? Give us a call at (916) 399-5500.