Building Your Down Payment

Lots of buyers qualify for various loan programs, but they can't afford a large down payment. Do you want to buy a new house, but aren't sure how to get together a down payment?

Slash your budget and build up savings. Look for ways to reduce your expenses to set aside money for a down payment. There are bank programs in which a portion of your take-home pay is automatically placed into a savings account each pay period. You could look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or stay local for your family vacation.

Sell things you do not need and get a part-time job. Try to get an additional job. This can be rough, but the temporary trial can provide your down payment money. Additionally, you can make a comprehensive inventory of things you may be able to sell. Unworn gold jewelry can be sold at local jewelers. You might have collectibles you can put up for sale on an online auction, or household items for a tag or garage sale. You could also research what your investments may sell for.

Borrow from your retirement funds. Research the details of your particular plan. Some homebuyers get down payment money from withdrawing what they need from Individual Retirement Accounts or getting money out of their 401(k) programs. Make sure you know about any penalties, the effect this may have on your income taxes, and repayment obligation.

Ask for a gift from family. First-time buyers are often lucky enough to receive down payment help from giving parents and other family members who are prepared to help get them in their first home. Your family members may be happy at the chance to help you reach the goal of owning your first home.

Learn about housing finance agencies. Provisional mortgage programs are offered to homebuyers in certain circumstances, such as low income homebuyers or people planning to improve homes in a specific area, among others. With the help of a housing finance agency, you can be given a below market interest rate, down payment help and other benefits. Housing finance agencies can assist eligible homebuyers with a reduced rate of interest, help with your down payment, and offer other assistance. These non-profit agencies were formed to boost community in specific areas.

Research no-down and low-down mortgages.

• FHA mortgage loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a vital part in helping low and moderate-income Americans qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who wish to get home financing. FHA provides mortgage insurance to the private lenders, making the buyers eligible for a mortgage loan. Interest rates for an FHA mortgage are normally the current interest rate, while the down payment with an FHA loan are less than those of conventional loans. The required down payment may be as low as 3 percent and the closing costs may be included in the mortgage loan.

• VA mortgages

  Guaranteed by the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This particular loan requires no down payment, has limited closing costs, and provides the benefit of a competitive rate of interest. Even though the mortgage loans aren't actually issued by the VA, the department certifies applicants by providing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage covers 80 percent. The homebuyer covers the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  With a carry-back 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 lending institution and borrow the remainder from the seller. Often, this kind of second mortgage has higher interest.

No matter your method of pulling together your down payment, the satisfaction of reaching the goal of owning your own home will be just as sweet!