Putting Together Your Down Payment

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

Some loan programs are available for no money down, but you still need to plan on closing costs, if the seller will not negotiate on the closing costs, and you will also need moving expenses, deposits for utilities, and a lot of other expenses, which come with purchasing a home.  Here are suggestions as to how to save and plan for those expenses.

Slash the budget and build up savings.  Turn your budget inside out to discover extra money to go toward your down payment. There are programs through your bank and employer, which will take a portion of your take-home pay and automatically transferred it into a savings account each pay period.  Look at your bank statements and find some big expenses in your spending history that you can do without, or reduce.  Or you may move into less expensive housing, or move in temporarily with family, or stay local for your vacations.

Work more and sell items you do not need.  Try to get a second job to pay off credit cards and put money into your savings account quickly.  This can be rough, but the temporary difficulty can help you get your down payment.  Additionally, you can put together a comprehensive list of things you can sell.  Broken gold jewelry can be sold at local jewelers.  If you have collectibles you can put them up for sale on an auction website, or for household goods do a garage sale.

Tap into your retirement funds.  Check the provisions of your particular plan.  It is possible to borrow funds from a 401(k) plan for you down payment or perform a withdrawal from an Individual Retirement Account.  You will want to ensure you are clear about any penalties, the way this will affect your taxes, and any repayment terms.

Ask for a gift from family.  First-time buyers are often fortunate enough to ask for help with their down payment assistance from gracious parents and other family members who may be able to help get them into their own home.  Your family members may be pleased at the chance to help you reach the goal of buying your own home.

Learn about down payment assistance programs.  Special mortgage programs are given to buyers in specific circumstances, such as low income purchasers or homebuyers looking to improve houses in a specific neighborhood, among others.  Financing with these type of program, you may receive an interest rate that is below market, or delayed payments, and other incentives.  These non-profit programs are designed to boost home ownership in certain areas.  Contact me and I will share with you what is available. 

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

• FHA loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate income individuals to qualify for mortgages.  FHA enabling new homebuyers who may not qualify for a traditional loan, to receive financing.  Interest rates for an FHA mortgage are normally the market interest rate, while the down payment for an FHA mortgage are 3.5% of the purchase price, and the seller may contribute 6% of the purchase price towards the buyers closing costs. 

• VA loans

  VA loans guarantee the lender for lenders.  The Department of Veterans Affairs offer 100% financing.  Veterans and service people can benefit from a VA loan, which generally offers a reasonable rate of interest and no down payment.  While the VA doesn't actually finance the mortgages, it does certify eligibility to qualify for a VA loan.  There is no mortgage insurance on a VA loan, but there is a VA funding fee.

• USDA loans These are 100% financing through the United States Department of Agriculture and they have mortgage insurance which is lower than FHA and Conventional loans and competitive interest rates compared to other programs.  They are only available in specific areas so call me and let's see if there are areas near you.  In Sarasota, they are east of I-75. 

• Conventional loans

  Conventional loan programs allow for as little as 3% down payment and the mortgage insurance is less than the FHA loan programs.  The seller can contribute 3% of the purchase price towards the buyers closing costs.