Building Your Down Payment

Lots of borrowers qualify for a loan, but they don't have a lot of money to put up a down payment. Here's where you start

Tighten your belt and save. Scrutinize the budget to uncover extra money to go toward your down payment. You might also try enrolling in an automatic savings plan at your bank to automatically have a specific portion of your take-home pay transferred into your savings account. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or stay close to home for your family vacation.

Sell items you don't need and find a part-time job. Perhaps you can get a second job and build up your earnings. In addition, you can put together a comprehensive list of items you may be able to sell. Unused gold jewelry can be sold at local jewelers. Multiple small items might add up to a nice sum at a garage or tag sale. You can also research what your investments may sell for.

Borrow from your retirement plan. Explore the specifics of your particular plan. Some people get down payment money by withdrawing funds from Individual Retirement Accounts or getting money out of 401(k) plans. You will want to ensure you are knowledgable about any penalties, the effect this could have on income taxes, and repayment terms.

Ask for a gift from family. First-time buyers are sometimes fortunate enough to receive help with their down payment help from giving family members who may be anxious to help them get into their first home. Your family members may be happy at the chance to help you reach the milestone of owning your first home.

Research housing finance agencies. These types of agencies provide special mortgate loan programs- for low and moderate-income homebuyers, buyers interested in renovating a house within a targeted area, and other certain kinds of buyers as specified by the finance agency. Financing with this type of agency, you may get a below market interest rate, down payment help and other incentives. These types of agencies can assist eligible homebuyers with a reduced interest rate, get you your down payment, and provide other advantages. These non-profit agencies exist to promote home ownership in particular neighborhoods.

Find out about low-down and no-down mortgages.

  • FHA mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in aiding low to moderate-income individuals get mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, enabling homebuyers who might not qualify for a conventional mortgage, to get a mortgage. Interest rates with an FHA mortgage are usually the going interest rate, while the down payment for an FHA loan are smaller than those of conventional loans. The required down payment may go as low as three percent while the closing costs could be packaged in the mortgage.

  • VA mortgages

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This specialized loan does not require a down payment, has mimimal closing costs, and provides the benefit of a competitive interest rate. Although the mortgages aren't actually issued by the VA, the office verfifies applicants by issuing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes at the same time as the first. Often the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. The homebuyer covers the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her home equity. In this scenario, you would borrow the majority of the purchase price from a traditional lending institution and borrow the remainder from the seller. Typically you will pay a somewhat higher rate on the loan from the seller.

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

Need to talk about down payments? Give us a call at 877-310-6200.

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