Putting Together Your Down Payment
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Lots of buyers can easily qualify for various loan programs, but they don't have much to pay the standard down payment. Here's where to get started
Tighten your belt and save. Be on the look-out for ways you can reduce your expenditures to save toward a down payment. You also might enroll in an automatic savings plan at your bank to have a percentage of your payroll automatically moved into a savings account. You could look into some big expenses in your budget that you can live without, or reduce, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.
Sell things you do not need and get a second job. Maybe you can get an additional job and build up your earnings. In addition, you can put together a comprehensive inventory of items you can sell. Unused gold jewelry can bring a good price from local jewelry stores. A closet full of small things might add up to a fair amount at a garage or tag sale. You might also research what any investments you have will bring if sold.
Borrow money from a retirement plan. Check the provisions of your specific plan. It is possible to borrow funds from a 401(k) plan for you down payment or perform a withdrawal from an Individual Retirement Account. Make sure you comprehend the tax ramifications, your obligation for repayment, and early withdrawal penalties.
Ask for a generous gift from family. Many buyers are often fortunate enough to receive help with their down payment assistance from gracious family members who may be willing to help get them in their own home. Your family members may be willing to help you reach the goal of owning your own home.
Research housing finance agencies. Special mortgage loan programs are given to buyers in certain circumstances, like low income homebuyers or homebuyers looking to renovating houses in a specific place, among others. Working through this kind of agency, you can be given a below market interest rate, down payment assistance and other incentives. Housing finance agencies may help eligible homebuyers with a lower interest rate, help with your down payment, and offer other assistance. The main mission of non-profit housing finance agencies is to promote residential ownership in targeted places.
Learn about low-down and no-down mortgages.
- Federal Housing Administration (FHA) loans
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 to moderate-income individuals qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who need to qualify for mortgages.
FHA assists first-time buyers and others who would not be able to qualify for a typical mortgage loan on their own, by offering mortgage insurance to the lenders.
Down payment requirements for FHA mortgages are smaller than those of traditional mortgage loans, although these mortgages come with average interest rates. Closing costs may be included in the mortgage, and the down payment can be as low as 3 percent of the total amount.
- VA loans
VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can receive a VA loan, which usually offers a competitive fixed rate of interest, no down payment, and reduced closing costs. Although the VA does not actually issue the mortgages, it does certify eligibility to apply for a VA loan.
- Piggy-back loans
You can finance 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%. The homebuyer covers the remaining 10%, rather than putting the typical 20% down payment.
- Carry-Back loans
In a "carry back" situation, the seller commits to loan you a piece of his own equity to help you get your down payment funds. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remainder with the seller. Usually you'll pay a slightly higher rate with the loan financed by the seller.
No matter how you gather down payment funds, the satisfaction of reaching the goal of living in your own home will be just as sweet!
Need to talk about the best options for down payments? Call us at 575-769-9006.