Putting Together Your Down Payment

Many borrowers qualify for various loan programs, but they can't afford a large down payment. Down payments can be as little at 3% of the purchase price with some requiring no down payment such as VA or USDA loans. Here are some ideas to increase your down payment. 

Tighten your belt and save. Look for ways you can trim your monthly expenditures to save toward a down payment. There are bank programs through which a specific portion of your take-home pay is automatically transferred into savings every pay period. Some effective strategies to put together funds include moving into a residence that is less expensive, and skipping a year's vacation.

Sell things you do not really need and get a part-time job. Perhaps you can get an additional job and build up your savings. You can also get creative about the things you can put up for sale. Maybe you own desirable items you can sell on an online auction, or quality household items for a garage or tag sale. You can also look into what any investments you own may sell for.

Borrow from your retirement funds. Explore the details of your particular plan. It is possible to borrow money from a 401(k) plan for a down payment, retirement plan, or get a withdrawal from an IRA. Make sure you understand about any penalties (if any), and the way this may affect on your taxes, and repayment terms.

Ask for help from members of your family. Home buyers sometimes receive help with their down payment assistance from gracious parents and other family members who may be eager to help get them in their first home. "Gifts" for down payment from family members can be as little as 3.5% for FHA loans or 3% for conventional loans. This can all be "gift money".  Check with your family members as they may be ready to help you reach the milestone of owning a home.

Learn about housing finance agencies. These agencies provide special loan programs for moderate and low income buyers, buyers with an interest in renovating a home within a particular part of the city, and additional groups as defined by the agency. With the help of a housing finance agency, you may receive an interest rate that is below market, down payment assistance and other benefits. Housing finance agencies can help eligible homebuyers with a reduced interest rate, get you your down payment, and offer other advantages. The main purpose of not-for-profit housing finance agencies is to promote the purchase of homes in certain parts of the city.

Learn about low-down and no-down mortgage loans.

• FHA mortgage loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in helping low and moderate-income families get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who need to get home financing. FHA assists first-time buyers and others who would not be eligible for a typical mortgage by themselves, by offering mortgage insurance to private lenders. Closing costs can be covered by the mortgage, and your down payment can be as low as 3.5% of the purchase price.

• Conventional mortgage loans only require 3% down of the purchase price.

• VA mortgages

  Guaranteed by the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This special loan does not require a down payment, has limited closing costs, and offers a competitive rate of interest. Although the VA does not actually issue the loans, a certificate of eligibility to apply for a VA mortgage is needed.

• Piggy-back loans

  You may fund a down payment with a second mortgage that closes with the first. Often the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Rather than the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

• Carry-Back loans

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

No matter how you gather your down payment funds, the thrill of reaching the goal of living in your own home will be just as great!  Need to talk about down payments? Give us a call at (303) 650-9400.