Your Down Payment

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Many borrowers can easily qualify for a mortgage loan, but they can't afford a large down payment. Here are a few ways to put together your down payment

Slash your budget and build up savings. Look for ways you can reduce your expenditures to put away money for a down payment. You could also try enrolling in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay transferred into a savings account. You might look into some big expenses in your budget that you can give up, or trim, at least temporarily. For example, you might move into less expensive housing, or skip a family vacation.

Work a second job and sell things you don't need. Maybe you can get an additional job and build up your earnings. You can also get creative about the things you can sell. A closet full of small items could add up to a fair amount at a garage or tag sale. You might also explore what any investments you hold may bring if sold.

Borrow from your retirement funds. Check the parameters of your specific plan. It is possible to take out funds from a 401(k) for a down payment or withdraw from an IRA. Make sure you understand the tax ramifications, repayment terms, and penalties for withdrawing early.

Ask for assistance from generous family members. First-time buyers sometimes get help with their down payment help from thoughtful family members who may be willing to help them get into their own home. Your family members may be eager to help you reach the goal of owning your first home.

Research housing finance agencies. Special mortgage loans are given to buyers in specific circumstances, like low income buyers or homebuyers looking to renovating houses in a specific place, among others. Working through this type of agency, you may be given a below market interest rate, down payment assistance and other incentives. These kinds of agencies can assist eligible homebuyers with a reduced rate of interest, help with your down payment, and provide other benefits. These non-profit programs to promote community in particular neighborhoods.

Explore no-down and low-down mortgage loans.

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in helping low and moderate-income Americans get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to get mortgages. FHA helps first-time buyers and others who would not be eligible for a conventional loan on their own, by offering mortgage insurance to the lenders. Interest rates with an FHA loan typically feature the going interest rate, but the down payment requirements with an FHA mortgage are less than those of conventional loans. The down payment may be as low as three percent while the closing costs could be financed in the mortgage.

  • VA mortgage loans

    With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This special loan requires no down payment, has reduced closing costs, and provides the advantage of a competitive interest rate. Although the VA doesn't provide the mortgage loans, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You can finance a down payment using a second mortgage that closes at the same time as the first. Generally the piggyback loan is for 10 percent of the home's amount, and the first mortgage finances 80 percent. The homebuyer covers the remaining 10%, instead of having to put together the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" mortgage, the seller commits to lend you part of his home equity to help you with your down payment money. You would finance the largest portion of the purchase price with a traditional lender and finance the remaining amount with the seller. Typically you will pay a slightly higher rate with the loan financed by the seller.

The feeling of accomplishment will be the same, no matter how you manage to come up with your down payment. Your brand new home will be well worth it!

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