Putting Together Your Down Payment

Lots of borrowers qualify for a loan, but they can't afford a large down payment. Want to look into getting a new home, but aren't sure how to put together your down payment?

Slash the budget and build up savings. Scrutinize the budget to discover ways you can cut expenses to save for your down payment. Also, you can look into bank programs through which some of your paycheck is automatically transferred into savings every pay period. You might look into some big expenses in your spending history that you can live without, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your vacation.

Sell things you don't really need and get a part-time job. Perhaps you can find a second job and build up your earnings. You can also get serious about the possessions you really need and the items you could be able to put up for sale. You might own collectibles you can put up for sale at an online auction, or household goods for a garage or tag sale. Also, you can consider selling any investments you own.

Tap into your retirement funds. Research the details of your particular plan. You can borrow funds from a 401(k) for you down payment or withdraw from an Individual Retirement Account. Make sure you understand the tax ramifications, your obligation for repayment, and any early withdrawal penalties.

Ask for a gift from family. First-time buyers sometimes receive help with their down payment help from thoughtful parents and other family members who may be anxious to help get them in their own home. Your family members may be willing to help you reach the milestone of owning your first home.

Research housing finance agencies. These types of agencies provide special mortgage loan programs to low and moderate-income borrowers, buyers interested in renovating a home in a specific part of the city, and other groups as defined by each finance agency. With the help of a housing finance agency, you probably will be given a below market interest rate, down payment assistance and other incentives. These types of agencies can help you with a reduced interest rate, get you your down payment, and offer other advantages. These non-profit programs to build up home ownership in specific places.

Explore no-down and low-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 and moderate-income individuals qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who would not be able to qualify for a typical mortgage by themselves, by providing mortgage insurance to private lenders. Interest rates for an FHA loan typically feature the going interest rate, but the down payment amounts with an FHA loan will be less than those of conventional loans. Closing costs might be covered by the mortgage, and the down payment may be as low as 3% of the total.

• VA mortgage loans

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can receive a VA loan, which typically offers a reasonable rate of interest, no down payment, and reduced closing costs. Although the VA doesn't provide the mortgages, it does issue a certificate of eligibility to apply for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. Most of the time, the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Rather than the usual 20 percent down payment, the buyer just has to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to lend you part 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 lending institution and borrow the remainder from the seller. Generally, this kind of second mortgage will have a higher rate of interest.

No matter how you gather your down payment, the thrill of living in your own home will be just as great!