Putting Together Your Down Payment

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Many people who are looking to buy a new home can qualify for a mortgage loan, but they can't afford a large down payment. Want to buy a new home, but don't know how you should get together your down payment?

Tighten your belt and save. Turn your budget upside-down to uncover ways you can cut expenses to go toward your down payment. You also might enroll in an automatic savings plan at your bank to automatically have a specific amount from your paycheck transferred into a savings account. Some practical approaches to build up funds include moving into less expensive housing, and skipping a year's vacation.

Sell things you do not really need and get a second job. Perhaps you can get an additional job and save your earnings. In addition, you can make a comprehensive list of items you can sell. Unused gold jewelry can be sold at local jewelry stores. You may own desirable items you can sell on an auction website, or quality household items for a garage or tag sale. You can also research what your investments could bring if sold.

Borrow money from your retirement plan. Check the provisions of your retirement plan. Some homebuyers get down payment money by withdrawing funds from Individual Retirement Accounts or taking money out of 401(k) plans. Make sure you know about any penalties, the way this will affect on your income taxes, and repayment terms.

Ask for help from family members. First-time homebuyers sometimes get help with their down payment help from giving family members who are willing to help them get into their own home. Your family members may be inclined to help you reach the milestone of having your own home.

Research housing finance agencies. Special mortgage programs are provided to buyers in specific circumstances, like low income buyers or homebuyers planning to improve houses in a certain area, among others. Financing through this kind of agency, you can be given a below market interest rate, down payment assistance and other benefits. Housing finance agencies may help eligible buyers with a reduced interest rate, help with your down payment, and provide other benefits. The main mission of non-profit housing finance agencies is build up the purchase of homes in particular places.

Research no-down and low-down mortgage loan programs.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low to moderate-income individuals get mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who wish to get mortgages. FHA offers mortgage insurance to private lenders, ensuring the buyers are eligible for a home loan. Down payment requirements for FHA loans are less than those of conventional mortgage loans, even though these mortgages come with current rates of interest. Closing costs can be financed within the mortgage, while the down payment may be as low as 3 percent of the purchase price.

  • VA mortgage loans

    VA loans are guaranteed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which typically offers a reasonable rate of interest, no down payment, and minimal closing costs. While the mortgage loans aren't actually financed by the VA, the office certifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    You may fund a down payment using a second mortgage that closes along with the first. Usually the piggyback loan is for 10 percent of the home's price, while the first mortgage finances 80 percent. Instead of the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to lend you a portion of his own equity to assist you with your down payment funds. You would finance the largest portion of the purchase price with a traditional mortgage lending institution and finance the remainder with the seller. Usually this form of second mortgage will have a higher rate of interest.

No matter how you gather your down payment, the satisfaction of owning your own home will be just as sweet!

Need to talk about down payments? Call us at 916-731-4405.

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