Building Your Down Payment

Many buyers qualify for a mortgage loan, but they can't afford a large down payment. Here's where you start

Slash your budget and build up savings. Be on the look-out for ways you can reduce your expenses to save toward a down payment. Also, you can look into bank programs through which some of your paycheck is automatically placed into savings each pay period. Some practical ways to put together funds include moving into a residence that is less expensive, and skipping a year's vacation.

Sell things you don't really need and get a part-time job. Look for a second job. This can be rough, but the temporary difficulty can help you get your down payment. In addition, you can make a comprehensive list of things you may be able to sell. Broken gold jewelry can be sold at local jewelers. Maybe you have collectibles you can sell on an auction website, or quality household goods for a tag or garage sale. Also, you can think about selling any investments you hold.

Borrow your down payment from your retirement plan. Investigate the parameters of your specific plan. Some people get down payment money by withdrawing from Individual Retirement Accounts or borrowing from their 401(k) programs. Be sure you comprehend the tax consequences, your obligation for repaying funds, and possible penalties for withdrawing early.

Ask for a generous gift from family. First-time buyers are sometimes fortunate enough to receive down payment help from thoughtful 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 having your first home.

Research housing finance agencies. These types of agencies provide provisional mortgage loans to low and moderate-income borrowers, buyers interested in sprucing up a house within a particular part of the city, and other certain types of buyers as defined by the agency. Financing through a housing finance agency, you may be given a below market interest rate, down payment assistance and other benefits. These kinds of agencies can assist eligible homebuyers with a lower rate of interest, get you your down payment, and provide other assistance. These non-profit programs to promote the value of homes in particular areas.

Explore no-down and low-down mortgages.

  • Federal Housing Administration (FHA) mortgage 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 to moderate-income buyers get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who wish to get mortgages. FHA offers mortgage insurance to the private lenders, enabling buyers who might not be eligible for a typical loan, to get a mortgage. Interest rates for an FHA loan typically feature the going interest rate, while the down payment requirements with an FHA loan will be below those of conventional loans. Closing costs can be included in the mortgage, while the down payment could be as low as 3 percent of the purchase price.

  • VA mortgages

    VA loans are backed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which typically offers a low fixed rate of interest, no down payment, and reduced closing costs. Even though the mortgage loans are not actually issued by the VA, the department verfifies applicants by issuing eligibility certificates.

  • Piggy-back loans

    You may finance your down payment using a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, while the first mortgage covers 80 percent. In contrast to the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" mortgage, the seller commits to lend you some of his home equity to help you with your down payment money. The buyer finances the majority of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Typically you'll pay a somewhat higher rate on the loan financed by the seller.

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

Need to talk about down payments? Call us at 866-300-1550.

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