Building Your Down Payment

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Many borrowers can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Below are a few straightforward ways to put together your down payment

Cut expenses and save. Scrutinize your budget to find ways you can cut expenses to go toward your down payment. There are bank programs through which some of your take-home pay is automatically placed into a savings account every pay period. You might look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Work more and sell items you do not need. Perhaps you can get a second job to get your down payment money. In addition, you can make an exhaustive list of items you may be able to sell. Unused gold jewelry can be sold at local jewelry stores. Maybe you have collectibles you can put up for sale at an auction website, or household items for a tag or garage sale. Also, you might want to look into selling any investments you own.

Tap into retirement funds. Check the provisions of your specific program. Some people get down payment money from withdrawing funds from Individual Retirement Accounts or borrowing from 401(k) programs. Be sure you understand about any penalties, the effect this may have on taxes, and repayment terms.

Request a generous gift from family. First-time buyers sometimes receive help with their down payment help from giving parents and other family members who may be anxious to help get them in their own home. Your family members may be eager to help you reach the milestone of having your first home.

Contact housing finance agencies. These agencies offer special mortgage loans for moderate and low income borrowers, buyers interested in remodeling a house within a specific area, and additional specific kinds of buyers as specified by the agency. With the help of a housing finance agency, you probably will get a below market interest rate, down payment help and other incentives. Housing finance agencies can assist you with a lower rate of interest, get you your down payment, and offer other advantages. The central goal of not-for-profit housing finance agencies is boosting home ownership in specific places.

Research no-down and low-down mortgages.

  • 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 part in aiding low and moderate-income individuals get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA aids first-time buyers and others who may not be able to qualify for a typical loan on their own, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are typically the market interest rate, but the down payment amounts for an FHA mortgage are below those of conventional loans. The down payment may be as low as 3 percent and the closing costs may be financed in the mortgage.

  • VA mortgages

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people are eligible for a VA loan, which typically offers a low rate of interest, no down payment, and limited closing costs. Even though the VA does not provide the mortgage loans, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You can finance your down payment using a second mortgage that closes with the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. In contrast to the usual 20 percent down payment, the buyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to loan you part of his own equity to help you with your down payment money. The buyer finances most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Often, this form of second mortgage will have a higher rate of interest.

The feeling of accomplishment will be the same, no matter how you manage to put together your down payment. Your new home will be your reward!

Need to talk about your down payment? Call us: 909-358-4090.

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