Building Your Down Payment

Lots of borrowers can easily qualify for various loan programs, but they don't have a lot of money to put up the standard down payment. We have a few suggestions

Cut expenses and save. Turn your budget upside-down to find extra money to go toward your down payment. You might also try enrolling in an automatic savings plan at your bank to have a percentage of your pay automatically moved into savings. You might look into some big expenses in your budget that you can live without, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.

Work a second job and sell things you do not need. Maybe you can get an additional job and build up your earnings. Additionally, you can put together a comprehensive inventory of items you may be able to sell. Unused gold jewelry can be sold at local jewelry stores. You may have collectibles you can sell on an online auction, or household items for a tag or garage sale. Also, you might want to consider selling any investments you own.

Borrow money from your retirement plan. Explore the details of your individual plan. Some people get down payment money from withdrawing funds from Individual Retirement Accounts or getting funds out of their 401(k) programs. Make sure you understand the tax ramifications, repayment terms, and possible early withdrawal penalties.

Ask for a gift from family. Many homebuyers are often fortunate enough to receive down payment assistance from giving parents and other family members who may be anxious to help them get into their own home. Your family members may be inclined to help you reach the goal of owning your first home.

Contact housing finance agencies. These types of agencies offer special loan programs for moderate and low income borrowers, buyers interested in sprucing up a house within a particular area, and additional groups as defined by the agency. With the help of a housing finance agency, you probably will get an interest rate that is below market, down payment help and other advantages. These types of agencies can help you with a reduced interest rate, get you your down payment, and provide other benefits. These non-profit agencies to promote community in specific neighborhoods.

Research 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 critical role in aiding low and moderate-income buyers qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, helping the buyers to become eligible for a home loan. Down payment requirements for FHA mortgages are lower than those of conventional mortgages, even though these loans hold average rates of interest. The required down payment may go as low as three percent and the closing costs might be included in the mortgage loan.

  • VA mortgages

    With a guarantee from the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This special loan does not require a down payment, has limited closing costs, and offers a competitive interest rate. While the VA does not actually finance the mortgage loans, it does certify eligibility to qualify for a VA loan.

  • Piggy-back loans

    You may finance a down payment with a second mortgage that closes along with the first. In most cases the first mortgage covers 80% of the purchase price and the "piggyback" is for 10%. In contrast to the traditional 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    In the option of the seller "carrying back a second mortgage," the seller loans you part of his or her equity. In this scenario, you would finance the majority of the purchase price with a traditional mortgage lender and borrow the remainder from the seller. Typically, this kind of second mortgage will have a higher rate of interest.

No matter your strategy of putting together your down payment, the thrill of owning your own home will be just as great!

Want to discuss down payments? Call us: 218-237-5128.

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