Putting Together Your Down Payment

Lots of people who are looking to purchase a new house can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. We have a few ideas

Tighten your belt and save. Turn your budget upside-down to uncover ways you can cut expenses to save for your down payment. You could also try enrolling in an automatic savings plan at your bank to automatically have a set 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 trim, at least temporarily. For example, you may move into less expensive housing, or skip a vacation.

Work more and sell things you do not need. Look for a second job. This can be rough, but the temporary difficulty can help you get your down payment. You can also get creative about the things you may be able to sell. A closet full of small items can add up to a fair amount at a garage or tag sale. You might also explore what any investments you have may bring if sold.

Borrow from your retirement plan. Check the parameters of your particular program. You can borrow money from a 401(k) for a down payment or withdraw from an IRA. Be sure you comprehend the tax ramifications, your obligation for repaying the money, and early withdrawal penalties.

Ask for a gift from your family. First-time homebuyers sometimes receive help with their down payment assistance from caring parents and other family members who are anxious to help them get into their first home. Your family members may be inclined to help you reach the goal of buying your first home.

Contact housing finance agencies. These agencies offer special mortgage programs for moderate and low income homebuyers, buyers interested in remodeling a residence within a targeted area, and additional particular kinds of buyers as defined by each agency. Financing with a housing finance agency, you probably will get a below market interest rate, down payment assistance and other benefits. Housing finance agencies can assist eligible homebuyers with a reduced rate of interest, help with your down payment, and provide other benefits. The main mission of not-for-profit housing finance agencies is to promote the purchase of homes in specific places.

Explore no-down and low-down mortgage loans.

• 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 families qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, enabling buyers who will not qualify for a conventional mortgage, to get financing. Interest rates for an FHA loan are generally the current interest rate, while the down payment with an FHA mortgage are less than those of conventional loans. The required down payment may go as low as 3 percent and the closing costs could be financed in the mortgage loan.

• VA mortgages

  With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This specialized loan does not require a down payment, has minimal closing costs, and offers a competitive rate of interest. While the loans are not actually financed by the VA, the office verifies borrowers by issuing eligibility certificates.

• Piggy-back loans

  You may finance your down payment through a second mortgage that closes with the first. Most of the time, the piggyback loan takes care of 10 percent of the home's amount, and the first mortgage covers 80 percent. The borrower pays the remaining 10%, rather than putting the usual 20% down payment.

• Carry-Back loans

  We a seller carries back a second mortgage, the you borrow part of the seller's home equity.. You would finance the largest portion of the purchase price with a traditional lender and finance the remainder with the seller. Typically, this type of second mortgage has higher interest.

No matter your method of putting together down payment funds, the thrill of living in your own home will be just as sweet!