Putting Together Your Down Payment
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Many borrowers qualify for several different kinds of mortgages, but they don't have a large sum of cash to put up a down payment. Below are a few straightforward methods that will help you put together a down payment
Slash your budget and build up savings. Turn your budget upside-down to uncover ways you can cut expenses to save for your down payment. Also, you can look into bank programs in which some of your take-home pay is automatically deposited into a savings account each pay period. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay close to home for your vacation.
Sell items you don't really need and get a part-time job. Try to find a second job. This can be exhausting, but the temporary trial can provide your down payment money. You can also get creative about the items you can put up for sale. Maybe you have desirable items you can put up for sale at an auction website, or quality household goods for a garage or tag sale. You could also look into what your investments could bring if sold.
Borrow funds from a retirement plan. Investigate the provisions of your specific plan. Many people get down payment money from withdrawing funds from their IRAs or borrowing from their 401(k) programs. Be sure to learn about the tax consequences, your obligation for repaying the money, and early withdrawal penalties.
Request a gift from your family. First-time homebuyers are often fortunate enough to get down payment help from caring parents and other family members who may be willing to help them get into their first home. Your family members may be inclined to help you reach the goal of owning your first home.
Research housing finance agencies. Special mortgage loan programs are provided to buyers in specific situations, like low income purchasers or future homeowners looking to remodel houses in a targeted neighborhood, among others. Working through this kind of agency, you can get an interest rate that is below market, down payment help and other perks. Housing finance agencies may help eligible buyers with a lower rate of interest, get you your down payment, and offer other advantages. The main goal of non-profit housing finance agencies is build up home ownership in targeted areas.
Learn about low-down and no-down mortgage loans.
- FHA mortgage loans
The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low to moderate-income buyers qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get
FHA aids first-time buyers and others who would not be able to qualify for a conventional mortgage loan by themselves, by offering mortgage insurance to the private lenders.
Interest rates for an FHA loan usually feature the market interest rate, but the down payment requirements for an FHA mortgage will be below those of conventional loans. Closing costs may be financed in the mortgage, while your down payment may be as low as 3 percent of the total amount.
- VA mortgages
Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterans and service people. This specialized loan requires no down payment, has reduced closing costs, and offers a competitive rate of interest. While it's true that the mortgage loans aren't actually financed by the VA, the department verifies borrowers by providing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes along with the first. Most of the time, the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Instead of the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.
- Carry-Back loans
We a seller carries back a second mortgage, the you borrow a portion of the seller's home equity.. In this scenario, you would borrow the majority of the purchase price from a traditional mortgage lender and borrow the remaining amount from the seller. Typically you will pay a slightly higher rate on the loan from the seller.
The feeling of accomplishment will be the same, no matter which approach you use to pull together your down payment. Your new home will be your reward!
Want to discuss down payment options? Give us a call at 530-677-2703.