Building Your Down Payment

Many borrowers can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Start here

Cut expenses and save. Be on the look-out for ways to reduce your monthly expenses to set aside funds for a down payment. You might also try enrolling in an automatic savings plan to automatically have a predetermined amount from your paycheck transferred into a savings account. Some practical methods to put together funds include moving into housing that is less expensive, and skipping your family vacation for a year or two.

Sell items you don't really need and get a second job. Try to get an additional job. This can be exhausting, but the temporary trial can help you get your down payment. You can also get creative about the things you may be able to sell. Multiple small items can add up to a nice sum at a garage or tag sale. Also, you might want to think about selling any investments you own.

Borrow money from your retirement plan. Explore the specifics of your individual plan. It is possible to take out money from a 401(k) for a down payment or perform a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms, and any penalties for withdrawing early.

Ask for a generous gift from your family. Many homebuyers somtimes receive help with their down payment help from giving parents and other family members who may be anxious to help get them in their own home. Your family members may be willing to help you reach the milestone of having your first home.

Contact housing finance agencies. These agencies extend provisional mortgage programs to low and moderate-income buyers, buyers with an interest in sprucing up a house within a specific part of the city, and other specific types of buyers as specified by each finance agency. With the help of a housing finance agency, you can be given a below market interest rate, down payment assistance and other incentives. Housing finance agencies can assist you with a reduced interest rate, get you your down payment, and provide other assistance. These non-profit programs to boost community in particular areas.

Explore no-down and low-down mortgage loan programs.

• FHA mortgages

  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 Americans qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgages. FHA assists first-time homebuyers and others who may not be eligible for a conventional mortgage loan on their own, by providing mortgage insurance to private lenders. Down payment totals for FHA mortgages are less than those of typical mortgage loans, even though these loans have average interest rates. The required down payment can go as low as 3 percent while the closing costs can be covered by the mortgage.

• VA loans

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which generally offers a low rate of interest, no down payment, and minimal closing costs. While the mortgages are not actually financed by the VA, the office verfifies applicants by providing eligibility certificates.

• Piggy-back loans

  You can fund a down payment through a second mortgage that closes along with the first. In most cases the first mortgage covers 80% of the purchase price and the "piggyback" funds 10%. The homebuyer covers the remaining 10%, rather than putting the typical 20% down payment.

• Carry-Back loans

  We a seller carries back a second mortgage, the seller loans you part of his or her home equity. In this scenario, you would finance the majority of the purchase price with a traditional lending institution and borrow the remaining amount from the seller. Generally, this kind of second mortgage will have a higher rate of interest.

No matter how you gather your down payment, the satisfaction of owning your own home will be just as great!

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