Your Down Payment
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Many folks who would like to purchase a new house qualify for a loan, but they can't afford a large down payment. Here's where you start
Reduce expenses and save. Be on the look-out for ways to trim your expenses to put away money for a down payment. You also might enroll in an automatic savings plan to automatically have a specific amount from your paycheck transferred into savings. You might look into some big expenses in your budget that you can give up, or trim, at least temporarily. For example, you might decide to move into less expensive housing, or stay local for your vacation.
Sell things you don't need and find a second job. Maybe you can get a second job to get your down payment money. You can also seriously consider the possessions you actually need and the items you may be able to put up for sale. A closet full of small items can add up to a nice sum at a garage or tag sale. Also, you can consider selling any investments you hold.
Borrow from your retirement funds. Investigate the parameters of your specific program. Many people get down payment money by withdrawing funds from their Individual Retirement Accounts or taking funds out of their 401(k) programs. You will need to ensure you know about any penalties, the effect this will have on income taxes, and repayment terms.
Request a gift from your family. Many buyers are sometimes fortunate enough to receive down payment help from gracious parents and other family members who are eager to help get them in their own home. Your family members may be pleased to help you reach the goal of owning your first home.
Learn about housing finance agencies. Special loan programs are offered to buyers in specific circumstances, such as low income homebuyers or buyers planning to improve homes in a specific part of town, among others. With the help of this kind of agency, you probably will be given a below market interest rate, down payment help and other benefits. These kinds of agencies may help you with a lower rate of interest, get you your down payment, and provide other assistance. These non-profit programs exist to build up the value of homes in specific neighborhoods.
Research no-down and low-down mortgages.
- FHA loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low to moderate-income families get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who wish to get mortgages.
FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a home loan.
Down payment totals for FHA mortgages are less than those for typical mortgages, even though these loans hold average rates of interest. The required down payment can be as low as three percent and the closing costs may be covered by the mortgage loan.
- VA mortgage loans
VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans are eligible for a VA loan, which usually offers a low fixed interest rate, no down payment, and reduced closing costs. While the mortgage loans don't originate from the VA, the department verifies borrowers by providing eligibility certificates.
- Piggy-back loans
You may fund a down payment using a second mortgage that closes with the first. Usually the piggyback loan takes care of 10 percent of the home's amount, and the first mortgage finances 80 percent. Rather than the usual 20 percent down payment, the buyer just has to pull together the remaining 10 percent.
- Carry-Back loans
With a carry-back mortgage, the you borrow part of the seller's home equity.. The buyer finances most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Typically you'll pay a somewhat higher interest rate on the loan from the seller.
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 down payments? Call us at (612) 386-5901.