Building Your Down Payment

Lots of buyers can easily qualify for several different kinds of mortgages, but they don't have a lot of money to pay a down payment. Do you want to buy a new home, but don't know how to get together your down payment?

Reduce expenses and save. Be on the look-out for ways you can reduce your expenditures to save toward a down payment. There are bank programs through which a portion of your paycheck is automatically deposited into a savings account each pay period. You might look into some big expenses in your spending history that you can live without, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay close to home for your family vacation.

Work a second job and sell things you don't need. Perhaps you can get a second job and save your earnings. Additionally, you can put together a comprehensive inventory of things you may be able to sell. Broken gold jewelry can be sold at local jewelers. You may own collectibles you can sell at an online auction, or quality household goods for a garage or tag sale. You might also research what your investments will bring if sold.

Borrow from your retirement plan. Research the specifics for your individual plan. Some homebuyers get down payment money by withdrawing funds from IRAs or borrowing from 401(k) plans. Make sure you understand the tax consequences, repayment terms, and early withdrawal penalties.

Ask for help from members of your family. First-time buyers are often lucky enough to receive help with their down payment help from caring family members who are prepared to help get them in their own home. Your family members may be inclined to help you reach the goal of buying your own home.

Learn about housing finance agencies. These types of agencies provide provisional mortgage programs to low and moderate-income buyers, buyers with an interest in sprucing up a house in a particular area, and additional certain types of buyers as defined by each agency. Financing through a housing finance agency, you may be given a below market interest rate, down payment assistance and other benefits. Housing finance agencies may assist eligible buyers with a lower rate of interest, get you your down payment, and provide other assistance. The primary purpose of not-for-profit housing finance agencies is to boost the purchase of homes in particular areas.

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

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in aiding low and moderate-income buyers get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who might not be eligible for a typical mortgage on their own, by offering mortgage insurance to private lenders. Down payment requirements for FHA mortgages are lower than those of typical mortgages, although these mortgages come with current interest rates. Closing costs can be financed within the mortgage, and the down payment can be as low as 3 percent of the total.

  • VA mortgages

    VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which generally offers a reasonable interest rate, no down payment, and minimal closing costs. Even though the VA doesn't finance the mortgage loans, it does issue a certificate of eligibility to apply for a VA loan.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes at the same time as the first. Usually the piggyback loan is for 10 percent of the purchase amount, while the first mortgage covers 80 percent. The borrower covers the remaining 10%, instead of come up with the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to loan you part of his own equity to help you get your down payment funds. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Typically you will pay a somewhat higher rate on the loan from the seller.

The satisfaction will be the same, no matter how you manage to get together your down payment. Your new home will be well worth it!

Want to discuss down payments? Call us at (512) 291-6100.

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