Building Your Down Payment

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Lots of folks who would like to buy a new home qualify for a mortgage loan, but they can't afford a large down payment. Below are a few ways to get together your down payment

Reduce expenses and save. Be on the look-out for ways you can trim your monthly expenses to set aside money for a down payment. You might also try enrolling in an automatic savings plan to have a portion of your payroll automatically transferred into a savings account. You would be wise to look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or skip a vacation.

Sell items you do not need and find a second job. Maybe you can get a second job to get your down payment money. You can also get creative about the things you can sell. A closet full of small items may add up to a nice sum at a garage or tag sale. You might also explore what any investments you hold may sell for.

Borrow from your retirement funds. Explore the details for your particular plan. Some people get down payment money from withdrawing funds from Individual Retirement Accounts or taking money out of 401(k) plans. You will need to be sure you understand about any penalties, the effect this will have on income taxes, and repayment terms.

Ask for help from family members. First-time buyers are often lucky enough to receive help with their down payment assistance from gracious parents and other family members who may be willing to help get them in their first home. Your family members may be pleased at the chance to help you reach the milestone of buying your own home.

Contact housing finance agencies. Provisional mortgage programs are provided to buyers in certain circumstances, such as low income purchasers or buyers planning to renovating houses in a particular area, among others. With the help of this kind of agency, you may get an interest rate that is below market, down payment help and other perks. Housing finance agencies can assist eligible buyers with a reduced interest rate, get you your down payment, and provide other advantages. These non-profit programs exist to build up community in certain areas.

Research no-down and low-down mortgage loan programs.

  • FHA loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a vital part in assisting low and moderate-income individuals qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who would not be eligible for a conventional loan by themselves, by offering mortgage insurance to the private lenders. Down payment amounts for FHA mortgages are below those with conventional mortgage loans, even though these mortgages have current interest rates. The down payment can be as low as three percent and the closing costs might be financed in the mortgage loan.

  • VA mortgage loans

    With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This particular loan requires no down payment, has minimal closing costs, and provides the benefit of a competitive interest rate. Even though the loans don't originate from the VA, the office certifies applicants by providing eligibility certificates.

  • Piggy-back loans

    You can finance your down payment with a second mortgage that closes at the same time as the first. Usually the piggyback loan is for 10 percent of the home's price, while the first mortgage finances 80 percent. The homebuyer covers the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" mortgage, the seller agrees to loan you some of his home equity to assist you with your down payment money. The buyer funds the majority of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Typically, this type of second mortgage will have higher interest.

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

Want to discuss the best options for down payments? Call us: 858-459-8700.