Building Your Down Payment

Lots of borrowers can easily qualify for various loan programs, but they can't afford a large down payment. Here are a few tips:

Slash the budget and build up savings. Be on the look-out for ways to trim your expenses to set aside funds for a down payment. You could also try enrolling in an automatic savings plan at your bank to automatically have a set portion of your take-home pay moved into savings. You would be wise to look into some big expenses in your spending history that you can do without, or trim, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay close to home for your vacation.

Sell items you don't really need and get a second job. Maybe you can get an additional job and build up your earnings. In addition, you can put together an exhaustive list of things you can sell. Unused gold jewelry can be sold at local jewelers. You may have collectibles you can put up for sale on an online auction, or quality household goods for a tag or garage sale. You could also look into what any investments you hold will bring if sold.

Tap into your retirement funds. Investigate the parameters of your specific program. You can borrow money from a 401(k) plan for a down payment or withdraw from an IRA. Make sure you are clear about any penalties, the way this may affect on income taxes, and repayment terms.

Ask for a generous gift from family. Many buyers are often lucky enough to get help with their down payment assistance from giving parents and other family members who are willing to help them get into their first home. Your family members may be willing to help you reach the milestone of having your own home.

Research housing finance agencies. Special mortgage programs are given to buyers in specific situations, like low income buyers or people planning to renovating houses in a particular neighborhood, among others. With the help of a housing finance agency, you can be given a below market interest rate, down payment help and other advantages. Housing finance agencies can assist you with a reduced rate of interest, help with your down payment, and provide other assistance. The primary mission of non-profit housing finance agencies is to promote residential ownership in targeted parts of the city.

Explore no-down and low-down mortgage loans.

  • FHA mortgage loans

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a significant role in assisting low and moderate-income families qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who need to get mortgages. FHA provides mortgage insurance to private lenders, enabling homebuyers who might not qualify for a traditional mortgage, to obtain home financing. Interest rates with an FHA loan normally feature the current interest rate, but the down payment requirements with an FHA loan are smaller than those of conventional loans. The down payment can go as low as 3 percent and the closing costs could be included in the mortgage.

  • VA loans

    VA loans are backed by the Department of Veterans Affairs. Service persons and veterans qualify for a VA loan, which typically offers a reasonable fixed rate of interest, no down payment, and minimal closing costs. While the VA doesn't provide the mortgage loans, it does certify eligibility to apply for a VA loan.

  • Piggy-back loans

    You may finance a down payment with a second mortgage that closes along with the first. Generally the piggyback loan takes care of 10 percent of the purchase amount, while the first mortgage finances 80 percent. The borrower covers the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to loan you a piece of his home equity to help you get your down payment funds. The buyer finances the highest percentage of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Often, this kind of second mortgage will have higher interest.

No matter your strategy of putting together your down payment, the thrill of owning your own home will be just as great!

Want to discuss the best options for down payments? Call us: (718) 639-9500.

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