Building Your Down Payment

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Many folks who are looking to buy a new house can qualify for various loan programs, but they can't afford a large down payment. Here are a few methods that will help you get together a down payment

Reduce expenses and save. Turn your budget upside-down to uncover ways you can cut expenses to go toward your down payment. There are bank programs in which a portion of your paycheck is automatically transferred into a savings account every pay period. You could look into some big expenses in your budget that you can give up, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or skip a family vacation.

Work more and sell things you don't need. Maybe you can find a second job to get your down payment money. You can also seriously consider the possessions you actually need and the items you can put up for sale. Maybe you have desirable items you can sell at an online auction, or household items for a garage or tag sale. Also, you can consider selling any investments you hold.

Borrow from retirement funds. Explore the details of your particular plan. You can take out money from a 401(k) plan for you down payment or withdraw from an Individual Retirement Account. Make sure you comprehend the tax consequences, your obligation for repaying the money, and penalties for withdrawing early.

Request a gift from family. First-time buyers are sometimes fortunate enough to get down payment assistance from gracious family members who are able to help them get into their first 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 offer provisional loan programs for moderate and low income homebuyers, buyers interested in remodeling a home in a specific part of the city, and additional groups as defined by the agency. Working with this type of agency, you can be given an interest rate that is below market, down payment help and other benefits. These types of agencies may assist eligible buyers with a reduced rate of interest, help with your down payment, and offer other benefits. The principal purpose of not-for-profit housing finance agencies is boosting residence ownership in certain parts of the city.

Find out about low-down and no-down mortgage loan programs.

• FHA mortgages

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income Americans get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, enabling buyers who may not be eligible for a typical mortgage, to obtain a mortgage. Interest rates for an FHA mortgage typically feature the going interest rate, while the down payment requirements with an FHA loan will be below those of conventional loans. Closing costs may be included in the mortgage, and your down payment might be as low as 3 percent of the purchase price.

• VA mortgages

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which usually offers a competitive fixed rate of interest, no down payment, and reduced closing costs. Even though the mortgages aren't actually provided by the VA, the office certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  You can finance your down payment with a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan takes care of 10 percent of the home's amount, and the first mortgage finances 80 percent. The borrower pays the remaining 10%, rather than putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you some of his own equity to help you get your down payment funds. 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 type of second mortgage has a higher rate of interest.

No matter your method of getting together your down payment money, the thrill of reaching the goal of owning your own home will be just as great!