Putting Together Your Down Payment

Lots of folks who would like to buy a new home qualify for various loan programs, but they can't afford a large down payment. Want to buy a new home, but aren't sure how to get together a down payment?

Cut expenses and save. Scrutinize the budget to uncover ways you can cut expenses to go toward your down payment. You also could enroll in an automatic savings plan to have a percentage of your pay automatically transferred into your 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 move into less expensive housing, or skip a family vacation.

Work more and sell items you do not need. Maybe you can find an additional job and save your earnings. Additionally, you can put together an exhaustive inventory of things you can sell. Broken gold jewelry can bring a good amount from local jewelers. Multiple small items might add up to a nice sum at a garage or tag sale. You can also look into what any investments you own may sell for.

Borrow funds from a retirement plan. Research the specifics of your particular plan. Many homebuyers get down payment money from withdrawing what they need from Individual Retirement Accounts or borrowing from their 401(k) plans. Be sure to find out about the tax consequences, repayment terms, and early withdrawal penalties.

Ask for a gift from family. First-time homebuyers are sometimes fortunate enough to receive help with their down payment help from gracious parents and other family members who are prepared to help them get into their first home. Your family members may be happy at the chance to help you reach the milestone of having your first home.

Learn about housing finance agencies. These types of agencies provide special loan programs to moderate and low income buyers, buyers interested in sprucing up a home within a targeted area, and other particular types of buyers as defined by each finance agency. Financing through a housing finance agency, you probably will get a below market interest rate, down payment assistance and other benefits. Housing finance agencies may help you with a lower interest rate, help with your down payment, and provide other assistance. The main purpose of non-profit housing finance agencies is boosting home ownership in particular places.

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

  • FHA loans

    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 qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who wish to get home financing. FHA provides mortgage insurance to private lenders, enabling buyers who may not be eligible for a typical loan, to receive a mortgage. Down payment sums for FHA mortgages are smaller than those for traditional mortgages, although these loans hold current rates of interest. Closing costs can be financed within the mortgage, and your down payment can be as low as 3% of the purchase price.

  • VA loans

    VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which typically offers a competitive interest rate, no down payment, and limited closing costs. While the VA does not actually provide the loans, it does certify eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You may fund your down payment through a second mortgage that closes with the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, while the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, instead of come up with the usual 20% down payment.

  • Carry-Back loans

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

No matter how you gather down payment money, the satisfaction of reaching the goal of owning your own home will be just as great!

Need to talk about the best options for down payments? Call us at 703.255-5810.

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