Building Your Down Payment

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Many borrowers qualify for various loan programs, but they can't afford a large down payment. Do you want to look into getting a new home, but don't know how to get together your down payment?

Tighten your belt and save. Look for ways to trim your expenses to set aside money for a down payment. There are bank programs through which a portion of your take-home pay is automatically transferred into a savings account each pay period. You would be wise to look into some big expenses in your budget that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or stay local for your vacation.

Work more and sell things you do not need. Maybe you can get a second job to get your down payment money. In addition, you can put together a comprehensive list of items you can sell. Broken gold jewelry can be sold at local jewelers. Maybe you have desirable items you can sell at an online auction, or quality household items for a tag or garage sale. Also, you can consider selling any investments you hold.

Borrow money from your retirement plan. Check the provisions of your particular plan. You can take out funds from a 401(k) for a down payment or get a withdrawal from an IRA. You will need to ensure you know about any penalties, the effect this will have on your taxes, and repayment obligation.

Ask for assistance from members of your family. Many buyers sometimes receive down payment help from giving parents and other family members who are willing to help them get into their first home. Your family members may be eager to help you reach the milestone of having your first home.

Learn about housing finance agencies. Special mortgage programs are provided to buyers in certain circumstances, such as low income purchasers or buyers planning to improve houses in a certain part of town, among others. With the help of a housing finance agency, you probably will be given a below market interest rate, down payment assistance and other incentives. These types of agencies can assist eligible homebuyers with a reduced interest rate, help with your down payment, and provide other benefits. The principal goal of non-profit housing finance agencies is to promote the purchase of homes in particular places.

Research no-down and low-down mortgage loans.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low to moderate-income buyers get mortgages. Part 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, making the buyers eligible for a mortgage loan. Down payment totals for FHA loans are less than those of typical mortgages, even though these mortgages come with current rates of interest. Closing costs may be covered by the mortgage, while the down payment could be as low as 3 percent of the total.

• VA mortgages

  Guaranteed by the Department of Veterans Affairs, a VA loan qualifies veterans and service people. This specialized loan requires no down payment, has limited closing costs, and provides the benefit of a competitive interest rate. While the VA doesn't actually issue the mortgages, it does issue a certificate of eligibility to qualify for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes with the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. Instead of the traditional 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  In the option of the seller "carrying back a second 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 lender and finance the remaining amount with the seller. Usually this kind of second mortgage has a higher rate of interest.

The satisfaction will be the same, no matter which method you use to come up with your down payment. Your brand new home will be your reward!