Building Your Down Payment

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Many buyers qualify for various loan programs, but they can't afford a large down payment. Start here

Reduce expenses and save. Be on the look-out for ways you can reduce your monthly expenses to set aside funds for a down payment. You may also decide to enroll in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay deposited into your savings account. You might look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or skip a vacation.

Work more and sell things you don't need. Perhaps you can find an additional job to get your down payment money. In addition, you can make an exhaustive inventory of things you may be able to sell. Broken gold jewelry can bring a good amount from local jewelry stores. Multiple small items can add up to a nice sum at a garage or tag sale. Also, you might want to think about selling any investments you own.

Borrow from your retirement funds. Explore the specifics of your particular plan. It is possible to take out money from a 401(k) plan for you down payment or perform a withdrawal from an Individual Retirement Account. You will need to make sure you are knowledgeable about any penalties, the effect this will have on income taxes, and repayment terms.

Ask for help from family members. Many homebuyers sometimes receive down payment help from caring family members who may be eager to help them get into their first home. Your family members may be inclined to help you reach the goal of owning your first home.

Contact housing finance agencies. Provisional mortgage loan programs are given to buyers in specific situations, like low income homebuyers or people looking to renovating homes in a certain neighborhood, among others. Financing with a housing finance agency, you can be given an interest rate that is below market, down payment assistance and other perks. These kinds of agencies may assist you with a lower interest rate, help with your down payment, and provide other benefits. These non-profit programs were established to promote home ownership in particular neighborhoods.

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

  • Federal Housing Administration (FHA) mortgage loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in helping low to moderate-income families qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in getting mortgages. FHA provides mortgage insurance to private lenders, helping the buyers to become eligible for a mortgage. Down payment totals for FHA mortgages are below those of typical mortgage loans, although these mortgages hold current rates of interest. Closing costs can be included in the mortgage, and your down payment could be as low as 3% of the total amount.

  • VA mortgages

    VA loans are backed by the Department of Veterans Affairs. Veterens and service people can receive a VA loan, which usually offers a competitive fixed rate of interest, no down payment, and limited closing costs. While the VA doesn't finance the mortgage loans, it does certify eligibility to apply for a VA loan.

  • Piggy-back loans

    You may finance a down payment through a second mortgage that closes along with the first. Usually the piggyback loan is for 10 percent of the purchase amount, while the first mortgage covers 80 percent. In contrast to the usual 20 percent down payment, the buyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In the case of a seller "carrying back a second mortgage," the you borrow part of the seller's home equity.. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically you will pay a somewhat higher interest rate on the loan from the seller.

No matter how you gather down payment money, the thrill of living in your own home will be just as sweet!

Need to talk about your down payment? Give Kevin Walton with C2 Financial Corporation a call: (800) 506-0632 ext. 0.