Building Your Down Payment

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Lots of borrowers can qualify for various loan programs, but they can't afford a large down payment. Start here

Cut expenses and save. Turn your budget inside out to discover ways you can cut expenses to save for your down payment. You might also decide to enroll in an automatic savings plan at your bank to have a portion of your payroll automatically transferred into a savings account. Some practical strategies to put together funds include moving into housing that is less expensive, and staying local for your vacation for a year or two.

Sell things you don't need and get a second job. Maybe you can find an additional job to get your down payment money. You can also get creative about the things you can put up for sale. Maybe you have collectibles you can sell on an auction website, or household goods for a garage or tag sale. Also, you might want to look into selling any investments you own.

Borrow funds from your retirement plan. Research the details of your particular plan. Some people get down payment money from withdrawing funds from IRAs or taking money out of 401(k) plans. Be sure to ask your plan representative about the tax consequences, your obligation for repaying funds, and any penalties for withdrawing early.

Ask for assistance from generous members of your family. First-time homebuyers sometimes get help with their down payment assistance from giving parents and other family members who are anxious to help get them in their first home. Your family members may be pleased to help you reach the goal of buying your own home.

Learn about housing finance agencies. These agencies provide special mortgage loans for low and moderate-income borrowers, buyers interested in remodeling a home within a targeted part of the city, and additional certain kinds of buyers as defined by the agency. Financing with this kind of agency, you probably will get an interest rate that is below market, down payment help and other advantages. These types of agencies can help eligible homebuyers with a reduced interest rate, get you your down payment, and offer other benefits. The main goal of not-for-profit housing finance agencies is to promote residential ownership in targeted parts of the city.

Find out about low-down and no-down mortgage loans.

• FHA mortgages

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low and moderate-income Americans get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting mortgage loans. FHA provides mortgage insurance to the private lenders, enabling buyers who may not qualify for a traditional mortgage loan, to get financing. Down payment amounts for FHA loans are smaller than those with conventional mortgage loans, even though these loans have average interest rates. The down payment may be as low as 3 percent while the closing costs might be included in the mortgage loan.

• VA mortgage loans

  Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This particular loan requires no down payment, has minimal closing costs, and provides the benefit of a competitive rate of interest. Even though the mortgages are not actually issued by the VA, the office verifies borrowers by issuing eligibility certificates.

• Piggy-back loans

  You may fund a down payment using a second mortgage that closes with the first. Generally the first mortgage is for 80% of the purchase amount and the "piggyback" is for 10%. The borrower covers the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" situation, the seller commits to loan you some of his home equity to help you with your down payment money. You would finance the majority of the purchase price with a traditional lender and borrow the remaining amount from the seller. Typically, this form of second mortgage has a higher rate of interest.

Want to discuss your down payment? Give us a call at 303-757-7555.