Building Your Down Payment

Lots of buyers can easily qualify for various loan programs, but they don't have much to pay the standard down payment. Start here

Slash the budget and build up savings. Turn your budget upside-down to discover extra money to go toward your down payment. Also, you can look into bank programs through which a portion of your paycheck is automatically deposited into savings each pay period. Some practical strategies to save additional funds include moving into less expensive housing, and skipping a year's vacation.

Sell items you do not need and find a part-time job. Look for an additional job. This can be rough, but the temporary difficulty can provide your down payment money. You can also get creative about the things you may be able to sell. 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 money from your retirement plan. Check the parameters of your retirement plan. You can borrow money from a 401(k) plan for you down payment or withdraw from an Individual Retirement Account. Be sure you understand the tax ramifications, your obligation for repayment, and possible early withdrawal penalties.

Ask for help from family members. Many homebuyers are sometimes lucky enough to receive down payment assistance from thoughtful family members who are anxious to help them get into their own home. Your family members may be inclined to help you reach the milestone of having your own home.

Contact housing finance agencies. Provisional mortgage programs are provided to homebuyers in specific situations, like low income homebuyers or people planning to improve houses in a particular area, among others. With the help of a housing finance agency, you may receive a below market interest rate, down payment help and other perks. These types of agencies can help you with a reduced rate of interest, get you your down payment, and provide other assistance. The primary purpose of non-profit housing finance agencies is promoting the purchase of homes in specific parts of the city.

Explore no-down and low-down mortgage loan programs.

• FHA loans

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in helping low to moderate-income individuals qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time buyers and others who would not be able to qualify for a typical mortgage on their own, by offering mortgage insurance to the private lenders. Interest rates with an FHA mortgage are generally the market interest rate, while the down payment for an FHA mortgage will be less than those of conventional loans. The required down payment can go as low as 3 percent and the closing costs can be financed in the mortgage loan.

• VA mortgage loans

  Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This particular loan requires no down payment, has limited closing costs, and provides a competitive interest rate. Even though the mortgage loans don't originate from the VA, the office certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes with the first. Most of the time, the piggyback loan takes care of 10 percent of the home's amount, and the first mortgage finances 80 percent. Instead of the traditional 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" agreement, the seller commits to loan you a piece of his own equity to help you with your down payment funds. In this scenario, you would finance the largest portion of the purchase price with a traditional lender and borrow the remainder from the seller. Usually this kind of second mortgage has a higher rate of interest.

Want to discuss your down payment? Give us a call: 214-865-7442.