Building Your Down Payment

Many folks who are looking to buy a new home can qualify for various loan programs, but they don't have much to put up a down payment. Here are a few ways to put together a down payment

Slash your budget and build up savings. Turn your budget inside out to discover extra money to save for your down payment. Also, you can look into bank programs through which some of your paycheck is automatically placed into a savings account every pay period. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Work more and sell things you don't need. Look for a second job. This can be rough, but the temporary trial can provide your down payment money. You can also get serious about the possessions you really need and the things you could be able to 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 own.

Tap into your retirement funds. Research the details of your individual plan. You may borrow funds from a 401(k) for you down payment or make a withdrawal from an IRA. Make sure you are clear about any penalties, the effect this may have on taxes, and repayment obligation.

Request a generous gift from family. Many buyers are often fortunate enough to get help with their down payment assistance from gracious family members who are willing to help them get into their own home. Your family members may be happy at the chance to help you reach the milestone of owning your own home.

Learn about housing finance agencies. Provisional mortgage programs are offered to buyers in specific situations, such as low income homebuyers or people planning to remodel houses in a certain area, among others. With the help of this type of agency, you probably will be given an interest rate that is below market, down payment help and other incentives. These types of agencies may help eligible buyers with a reduced rate of interest, get you your down payment, and provide other benefits. The central purpose of not-for-profit housing finance agencies is build up the purchase of homes in targeted areas.

Find out about low-down and no-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 an important role in aiding low and moderate-income families get mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling new homebuyers who may not be eligible for a typical loan, to get financing. Down payment sums for FHA loans are below those for typical mortgages, even though these mortgages come with average interest rates. The required down payment can be as low as 3 percent while the closing costs could be financed in the mortgage loan.

• VA mortgage loans

  Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This specialized loan requires no down payment, has reduced closing costs, and offers a competitive rate of interest. While the VA does not actually issue the loans, it does certify eligibility to qualify for a VA mortgage.

• Piggy-back loans

  You may finance your down payment with a second mortgage that closes along with the first. Generally the first mortgage is for 80% of the purchase amount and the "piggyback" funds 10%. In contrast to the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you a portion of his own equity to help you get your down payment funds. The buyer finances most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Usually this type of second mortgage has a higher rate of interest.

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