FROM OUR BLOG
August 26, 2016

Lots of people who would like to buy a new house can qualify for various loan programs, but they can’t afford a large down payment. Here are a few tips:

Tighten your belt and save. Be on the look-out for ways to reduce your monthly expenses to save toward a down payment. There are bank programs through which a portion of your take-home pay is automatically deposited into savings every pay period. You would be wise to 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 may move into less expensive housing, or stay close to home for your vacation.

Work more and sell things you don’t need. Try to get an additional job. This can be rough, but the temporary difficulty can provide your down payment money. In addition, you can put together an exhaustive list of things you may be able to sell. Broken gold jewelry can be sold at local jewelry stores. Multiple small items may add up to a fair amount at a garage or tag sale. Also, you might want to consider selling any investments you hold.

Tap into retirement funds. Investigate the provisions of your retirement plan. Many homebuyers get down payment money from withdrawing from Individual Retirement Accounts or getting funds out of 401(k) programs. Be sure you comprehend the tax ramifications, your obligation for repayment, and any early withdrawal penalties.

Ask for assistance from family members. First-time buyers are sometimes fortunate enough to get help with their down payment help from caring parents and other family members who are prepared to help them get into their first home. Your family members may be inclined to help you reach the goal of buying your own home.

Contact housing finance agencies. These agencies provide provisional mortgage loans to moderate and low income homebuyers, buyers with an interest in remodeling a residence within a targeted area, and additional certain kinds of buyers as defined by the agency. Working through this kind of agency, you may be given a below market interest rate, down payment help and other incentives. Housing finance agencies can help eligible homebuyers with a lower interest rate, help with your down payment, and offer other advantages. The main goal of not-for-profit housing finance agencies is promoting the purchase of homes in specific parts of the city.

Explore no-down and low-down mortgage loans.
Federal Housing Administration (FHA) mortgages: The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low and moderate-income individuals qualify for mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to get home financing. FHA provides mortgage insurance to the private lenders, ensuring the buyers are eligible for a loan. Interest rates for an FHA mortgage typically feature the going interest rate, but the down payment requirements with an FHA loan are below those of conventional loans. The required down payment may be as low as three percent and the closing costs can be covered by the mortgage.

VA loans: With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This special loan requires no down payment, has reduced closing costs, and provides a competitive interest rate. Even though the mortgages aren’t actually provided by the VA, the department certifies applicants by providing eligibility certificates.

Piggy-back loans: You can finance a down payment through a second mortgage that closes with the first. Usually the piggyback loan is for 10 percent of the purchase amount, and the first mortgage finances 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: With a carry-back mortgage, the seller loans you part of his or her equity. You would finance the majority of the purchase price with a traditional lender and finance the remaining amount with the seller. Usually 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!

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Sierra Pacific Mortgage Company, Inc.

Sierra Pacific Mortgage NMLS# 1788. Michael Shotnik NMLS: 218281, CO License: 100017466. Regulated in Colorado by the Division of Real Estate #988320. To check license status of mortgage loan originator, visit D.O.R.A. and NMLS consumer access.