Your Down Payment

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Lots of folks who would like to purchase a new home can easily qualify for various loan programs, but they can't afford a large down payment. Here are a few ways to put together a down payment. Ready to get started?

Tighten your belt and save. Be on the look-out for ways to trim your expenses to put away money for a down payment. Also, you can look into bank programs in which some of your take-home pay is automatically placed into savings each pay period. You might look into some big expenses in your budget that you can give up, or reduce, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a vacation.

Check the provisions of your retirement program. You can pull out funds from a 401(k) plan for a 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.

These types of agencies provide provisional loan programs for moderate and low income homebuyers, buyers interested in sprucing up a residence within a particular area, and other certain kinds of buyers as defined by the agency. Financing with a housing finance agency, you probably will get a below market interest rate, down payment help and other incentives. These kinds of agencies may help eligible homebuyers with a lower rate of interest, get you your down payment, and offer other advantages. The main purpose of not-for-profit housing finance agencies is to promote the purchase of homes in certain places.

Perhaps you can find an additional job and build up your earnings. You can also get creative about the items you might be able to put up for sale. You may have desirable items you can sell at an online auction, or household goods for a tag or garage sale. You could also look into what your investments may sell for.

First-time buyers are often fortunate enough to receive help with their down payment help from gracious parents and other family members who are prepared to help them get into their own home. Your family members may be inclined to help you reach the goal of buying your first home.

The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a vital part in aiding low and moderate-income Americans get mortgages. The FHA helps first-time homebuyers and others who may not qualify for a conventional mortgage on their own by insuring loans made by private lenders. Interest rates for an FHA mortgage normally feature the going interest rate, but the down payment with an FHA mortgage are below those of conventional loans. FHA down payment requirements are lower than those of most conventional programs, and the upfront mortgage insurance premium can be added to the loan amount.

A piggyback loan is a second mortgage that closes at the same time as the first. The first mortgage covers most of the purchase price, the piggyback loan covers part of the rest, and the homebuyer's own down payment covers the remainder. Buyers use this structure to avoid private mortgage insurance on the first mortgage without making the larger down payment a single conventional loan would need to avoid it.

With a guarantee from the Department of Veterans Affairs, a VA loan assists veterans and service people. This special loan requires no down payment and has limited closing costs. While the VA doesn't finance the mortgages, it does certify eligibility to qualify for a VA loan.

In a "carry back" situation, the seller agrees to loan you part of his own equity to assist you with your down payment money. The buyer funds the majority of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Typically you'll pay a slightly higher interest rate on the loan from the seller.