Building Your Down Payment

Many buyers qualify for various loan programs, but they can't afford a large down payment. Do you want to buy a new home, but aren't sure how to get together your down payment?

Tighten your belt and save. Look for ways you can reduce your monthly expenditures to save toward a down payment. You could also try enrolling in an automatic savings plan at your bank to automatically have a predetermined amount from your paycheck transferred into savings. Some effective approaches to build up funds include moving into a residence that is less expensive, and skipping your family vacation for a year or two.

Work a second job and sell items you do not need. Look for an additional job. This can be rough, but the temporary difficulty can help you get your down payment. You can also seriously consider the possessions you actually need and the things you migh be able to sell. Multiple small items may add up to a nice sum at a garage or tag sale. Also, you might want to consider selling any investments you own.

Borrow from your retirement funds. Check the parameters of your retirement program. You can take out money from a 401(k) for a down payment or withdraw from an Individual Retirement Account. Make sure you understand about any penalties, the effect this will have on taxes, and repayment obligation.

Ask for assistance from generous family members. Many homebuyers somtimes receive help with their down payment assistance from caring family members who are able to help get them in their first home. Your family members may be inclined to help you reach the milestone of owning your first home.

Research housing finance agencies. Special loan programs are given to homebuyers in specific situations, such as low income purchasers or homebuyers planning to improve homes in a targeted neighborhood, among others. Working with this type of agency, you probably will get an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies can assist eligible buyers with a lower interest rate, get you your down payment, and offer other benefits. The central purpose of not-for-profit housing finance agencies is to boost residential ownership in particular places.

Explore no-down and low-down mortgages.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in assisting low and moderate-income Americans get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA aids first-time buyers and others who might not be eligible for a traditional mortgage on their own, by offering mortgage insurance to lenders. Interest rates for an FHA loan are generally the going interest rate, while the down payment requirements for an FHA loan are less than those of conventional loans. Closing costs might be covered by the mortgage, and the down payment may be as low as 3 percent of the total.

  • VA loans

    Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This specialized loan requires no down payment, has mimimal closing costs, and provides a competitive rate of interest. While the VA does not provide the loans, it does certify eligibility to apply for a VA loan.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes with the first. Most of the time, the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. The borrower pays the remaining 10%, rather than having to pull together the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" agreement, the seller agrees to loan you a piece of his own equity to help you get your down payment funds. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lender and finance the remainder with the seller. Often, this type of second mortgage has higher interest.

The feeling of accomplishment will be the same, no matter which strategy you use to come up with the down payment. Your brand new home will be your reward!

Want to discuss down payments? Call us at 703.255-5810.

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