Putting Together Your Down Payment

Many folks who are looking to purchase a new house qualify for a loan, but they don't have much to pay a down payment. Here's where you start

Tighten your belt and save. Look for ways to reduce your expenses to put away money for a down payment. Also, you can look into bank programs through which a specific portion of your paycheck is automatically placed into savings each pay period. You might look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay close to home for your family vacation.

Sell items you don't really need and find a part-time job. Look for a second job. This can be exhausting, but the temporary trial can provide your down payment money. You can also seriously consider the possessions you actually need and the things you can put up for sale. Multiple small things could add up to a nice sum at a garage or tag sale. Also, you might want to consider selling any investments you hold.

Tap into retirement funds. Check the parameters of your specific plan. Many people get down payment money from withdrawing what they need from their IRAs or getting funds out of their 401(k) plans. Be sure you understand the tax consequences, repayment terms, and penalties for withdrawing early.

Request a generous gift from your family. Many buyers sometimes receive down payment help from gracious family members who may be willing to help get them in their first home. Your family members may be pleased to help you reach the goal of owning your first home.

Contact housing finance agencies. Special mortgage loans are offered to homebuyers in specific circumstances, like low income buyers or future homeowners looking to remodel homes in a particular area, among others. With the help of this type of agency, you probably will get a below market interest rate, down payment help and other perks. Housing finance agencies can assist you with a lower interest rate, help with your down payment, and offer other benefits. The main mission of not-for-profit housing finance agencies is to boost residence ownership in targeted parts of the city.

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

• Federal Housing Administration (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 assisting low to moderate-income buyers qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling buyers who will not qualify for a conventional loan, to get a mortgage. Interest rates for an FHA mortgage are generally the going interest rate, but the down payment requirements with an FHA mortgage will be below those of conventional loans. The required down payment can go as low as 3 percent and the closing costs might be covered by the mortgage loan.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterans and service people. This specialized loan does not require a down payment, has limited closing costs, and provides the advantage of a competitive rate of interest. Although the loans don't originate from the VA, the office certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  You may finance a down payment through a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan is for 10 percent of the purchase amount, and the first mortgage finances 80 percent. Instead of the traditional 20 percent down payment, the buyer will just have to cover the remaining 10 percent.

• Carry-Back loans

  We a seller carries 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, this form of second mortgage will have a higher rate of interest.

The feeling of accomplishment will be the same, no matter which strategy you use to come up with your down payment. Your new home will be well worth it!