Building Your Down Payment

Many buyers qualify for various loan programs, but they don't have a lot of money to pay a down payment. Below are a few methods that will help you put together a down payment

Slash the budget and build up savings. Turn your budget inside out to uncover ways you can cut expenses to save for your down payment. Also, you can look into bank programs in which a portion of your take-home pay is automatically transferred into savings every pay period. You would be wise to look into some big expenses in your spending history 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 family vacation.

Work a second job and sell items you don't need. Look for a second job. This can be exhausting, but the temporary trial can provide your down payment money. In addition, you can make a comprehensive list of things you can sell. Broken gold jewelry can bring a good amount from local jewelers. A closetful of small things can add up to a fair amount at a garage or tag sale. Also, you can look into selling any investments you hold.

Borrow from your retirement funds. Explore the specifics for your particular plan. Many homebuyers get down payment money by withdrawing from their Individual Retirement Accounts or borrowing from 401(k) plans. Make sure to ask your plan representative about the tax ramifications, repayment terms, and any early withdrawal penalties.

Ask for a generous gift from your family. Many buyers somtimes get help with their down payment help from giving parents and other family members who may be eager to help get them in their own home. Your family members may be pleased at the chance to help you reach the milestone of having your own home.

Research housing finance agencies. Provisional mortgate loan programs are offered to homebuyers in certain circumstances, like low income homebuyers or homebuyers looking to remodel houses in a targeted place, among others. With the help of this type of agency, you probably will receive a below market interest rate, down payment help and other incentives. These types of agencies can assist you with a reduced interest rate, get you your down payment, and offer other benefits. These non-profit programs were established to build up community in specific neighborhoods.

Explore no-down and low-down mortgages.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income families get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to get mortgage loans. FHA assists first-time buyers and others who might not be eligible for a traditional mortgage loan by themselves, by providing mortgage insurance to lenders. Interest rates for an FHA loan are normally the market interest rate, while the down payment amounts with an FHA mortgage are lower than those of conventional loans. Closing costs may be covered by the mortgage, while your down payment can be as low as 3 percent of the total.

  • VA mortgages

    VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which generally offers a low rate of interest, no down payment, and limited closing costs. Even though the mortgage loans don't originate from the VA, the office verfifies applicants by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes with the first. Generally the piggyback loan is for 10 percent of the purchase price, while the first mortgage covers 80 percent. In contrast to the usual 20 percent down payment, the buyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to lend you a portion of his home equity to help you with your down payment funds. The buyer funds most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually you'll pay a somewhat higher interest rate on the loan financed by the seller.

No matter how you gather your down payment, the satisfaction of reaching the goal of owning your own home will be just as sweet!

Want to discuss the best options for down payments? Give us a call: (510) 683-9850.

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