Building Your Down Payment

Many buyers qualify for various loan programs, but they don't have much to put up a down payment. Here are a few ways to get together a down payment

Slash the budget and build up savings. Be on the look-out for ways you can reduce your expenditures to save toward a down payment. You could also decide to enroll in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay moved into savings. Some practical approaches to put together funds include moving into less expensive housing, and staying home for your family vacation this year.

Work more and sell items you don't need. Look for an additional job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the things you can sell. Multiple small things might add up to a nice sum at a garage or tag sale. Also, you can think about selling any investments you hold.

Tap into retirement funds. Research the specifics for your particular plan. Some homebuyers get down payment money from withdrawing what they need from their Individual Retirement Accounts or borrowing from 401(k) plans. You will want to be sure you are clear about any penalties, the effect this may have on your income taxes, and repayment terms.

Ask for a gift from family. Many homebuyers are often lucky enough to receive help with their down payment assistance from caring family members who are prepared to help get them in their own home. Your family members may be pleased to help you reach the milestone of owning your own home.

Learn about housing finance agencies. Provisional mortgage programs are offered to homebuyers in specific circumstances, such as low income buyers or future homeowners looking to renovating houses in a particular part of town, among others. Working with this type of agency, you can get a below market interest rate, down payment help and other perks. Housing finance agencies may assist you with a lower rate of interest, help with your down payment, and provide other advantages. These non-profit agencies were established to boost the value of homes in specific areas.

Learn about low-down and no-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 an important part in helping low to moderate-income buyers get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting mortgages. FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for financing. Down payment requirements for FHA mortgages are lower than those with conventional mortgage loans, even though these mortgages come with average rates of interest. Closing costs may be financed in the mortgage, while the down payment may be as low as 3 percent of the total.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This special loan requires no down payment, has reduced closing costs, and offers a competitive interest rate. Even though the VA does not actually provide the mortgage loans, it does certify eligibility to apply for a VA loan.

• Piggy-back loans

  A piggy-back loan is 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 covers 80 percent. The homebuyer pays the remaining 10%, rather than putting the typical 20% down payment.

• Carry-Back loans

  In the case of the seller "carrying back a second mortgage," the seller loans you part of his or her equity. The buyer funds most of the purchase price with a traditional mortgage program and borrows the remainder from the seller. Generally, this kind of second mortgage will have higher interest.

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