Building Your Down Payment

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Many buyers qualify for various loan programs, but they can't afford a large down payment. Below are a few methods that will help you put together a down payment

Slash your budget and build up savings. Look for ways to reduce your monthly expenditures to save toward a down payment. You also might enroll in an automatic savings plan to automatically have a predetermined amount from your take-home pay moved into a savings account. You would be wise to look into some big expenses in your budget that you can live without, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or stay close to home for your family vacation.

Sell things you don't really need and find a second job. Perhaps you can find an additional job and build up your earnings. You can also get serious about the possessions you really need and the items you can put up for sale. A closet full of small things can add up to a fair amount at a garage or tag sale. You could also research what any investments you have will sell for.

Borrow from retirement funds. Explore the details of your individual plan. You can borrow money from a 401(k) for a down payment or withdraw from an Individual Retirement Account. Be sure to find out about the tax consequences, repayment terms, and possible early withdrawal penalties.

Ask for assistance from generous family members. Many buyers are sometimes fortunate enough to get help with their down payment help from gracious family members who are eager to help them get into their first home. Your family members may be pleased at the chance to help you reach the goal of buying your first home.

Learn about housing finance agencies. Provisional mortgage programs are extended to buyers in specific situations, such as low income purchasers or people planning to renovating houses in a particular neighborhood, among others. Financing through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives. These kinds of agencies may assist eligible buyers with a lower rate of interest, help with your down payment, and offer other advantages. These non-profit programs were established to promote home ownership in specific areas.

Research no-down and low-down mortgages.

• FHA loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in aiding low to moderate-income Americans get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, making the buyers eligible for a mortgage loan. Down payment amounts for FHA mortgages are below those for typical mortgage loans, although these mortgages hold current interest rates. Closing costs may be covered by the mortgage, and the down payment might be as low as 3 percent of the total.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan assists veterans and service people. This specialized loan does not require a down payment, has limited closing costs, and offers a competitive interest rate. Although the VA doesn't issue the loans, it does issue a certificate of eligibility to apply for a VA mortgage.

• Piggy-back loans

  You may finance your down payment through a second mortgage that closes along with the first. Generally the first mortgage covers 80% of the purchase price and the "piggyback" funds 10%. The homebuyer pays the remaining 10%, rather than needing to put together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you part of his own equity to assist you with your down payment money. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remaining amount with the seller. Generally, this kind of second mortgage has higher interest.

The feeling of accomplishment will be the same, no matter how you manage to come up with your down payment. Your brand new home will be your reward!