Putting Together Your Down Payment

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Lots of people who are looking to buy a new house qualify for several different kinds of mortgages, but they can't afford a large down payment. Here's where to get started

Tighten your belt and save. Scrutinize the budget to discover extra money to go toward your down payment. There are bank programs through which some of your paycheck is automatically deposited into a savings account every pay period. Some practical strategies to put together funds include moving into less expensive housing, and staying local for your family vacation this year.

Sell items you don't really need and get a part-time job. Try to find a second job. This can be rough, but the temporary difficulty can provide your down payment money. You can also seriously consider the possessions you actually need and the things you can sell. Maybe you have desirable items you can sell on an auction website, or household items for a tag or garage sale. Also, you can consider selling any investments you hold.

Borrow your down payment from your retirement plan. Check the parameters of your specific plan. It is possible to borrow funds from a 401(k) plan for a down payment or perform a withdrawal from an IRA. Make sure to find out about the tax consequences, repayment terms, and penalties for withdrawing early.

Ask for help from members of your family. Many homebuyers are often fortunate enough to receive down payment assistance from caring parents and other family members who are willing to help get them in their own home. Your family members may be pleased at the chance to help you reach the milestone of buying your first home.

Contact housing finance agencies. Special mortgage programs are provided to homebuyers in specific situations, such as low income buyers or future homeowners looking to improve homes in a targeted area, among others. Working through a housing finance agency, you can get a below market interest rate, down payment assistance and other incentives. These kinds of agencies can help you with a lower interest rate, get you your down payment, and offer other assistance. The principal goal of not-for-profit housing finance agencies is boosting home ownership in particular areas.

Research no-down and low-down mortgage loans.

  • 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 aiding low to moderate-income families qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in qualifying for home financing. FHA provides mortgage insurance to the private lenders, enabling buyers who may not qualify for a conventional mortgage loan, to receive a mortgage. Interest rates with an FHA loan are normally the market interest rate, but the down payment requirements with an FHA mortgage are lower than those of conventional loans. The down payment can be as low as 3 percent and the closing costs may be included in the mortgage loan.

  • VA loans

    VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which generally offers a low fixed interest rate, no down payment, and limited closing costs. While the VA does not issue the mortgage loans, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Usually the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer pays the remaining 10%, instead of come up with the usual 20% down payment.

  • Carry-Back loans

    In the option of a seller "carrying back a second mortgage," the you borrow a portion of the seller's home equity.. The buyer funds the majority of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Typically, this form of second mortgage will have a higher rate of interest.

The satisfaction will be the same, no matter how you manage to pull together your down payment. Your brand new home will be your reward!
Want to discuss down payment options? Call us: 909-660-8333.

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