Building Your Down Payment

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Many buyers qualify for various loan programs, but they can't afford a large down payment. We have a few ideas

Reduce expenses and save. Be on the look-out for ways to reduce your monthly expenses to put away money for a down payment. You also could enroll in an automatic savings plan to automatically have a set amount from your take-home pay transferred into savings. Some effective methods to build up funds include moving into a residence that is less expensive, and skipping your vacation for a year or two.

Sell items you do not really need and get a part-time job. Look for a second job. This can be rough, but the temporary difficulty can help you get your down payment. In addition, you can make a comprehensive list of things you can sell. Broken gold jewelry can be sold at local jewelers. Multiple small items could add up to a nice sum at a garage or tag sale. Also, you might want to look into selling any investments you hold.

Tap into retirement funds. Investigate the parameters of your retirement plan. Many people get down payment money from withdrawing funds from Individual Retirement Accounts or borrowing from 401(k) programs. Make sure you understand the tax ramifications, your obligation for repayment, and possible early withdrawal penalties.

Ask for a generous gift from your family. First-time buyers sometimes get down payment assistance from thoughtful family members who are prepared to help them get into their own home. Your family members may be pleased to help you reach the goal of buying your first home.

Research housing finance agencies. These agencies extend special mortgage loan programs to moderate and low income borrowers, buyers with an interest in rehabilitating a residence within a particular area, and additional specific kinds of buyers as specified by the finance agency. With the help of this type of agency, you may receive a below market interest rate, down payment help and other benefits. These types of agencies can assist eligible buyers with a reduced interest rate, get you your down payment, and offer other advantages. These non-profit programs exist to promote the value of homes in particular areas.

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 a vital role in assisting low and moderate-income individuals qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting mortgage loans. FHA provides mortgage insurance to the private lenders, enabling new homebuyers who might not qualify for a conventional mortgage, to obtain home financing. Down payment requirements for FHA loans are below those for conventional mortgages, although these mortgages have average rates of interest. Closing costs might be financed in the mortgage, while your down payment might be as low as 3% of the purchase price.

• VA mortgage loans

  VA loans are backed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a low fixed interest rate, no down payment, and reduced closing costs. Even though the VA doesn't actually issue the loans, it does certify eligibility to qualify for a VA loan.

• Piggy-back loans

  You may fund a down payment with a second mortgage that closes with the first. Generally the piggyback loan is for 10 percent of the home's price, and the first mortgage finances 80 percent. The borrower pays the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you a piece of his own equity to help you get your down payment funds. The buyer finances the majority of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Typically you will pay a slightly higher interest rate with the loan from the seller.

The satisfaction will be the same, no matter how you manage to come up with the down payment. Your new home will be your reward!