Building Your Down Payment

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Many borrowers can qualify for several different kinds of mortgages, but they don't have a lot of cash to pay the standard down payment. Here's where to get started

Tighten your belt and save. Turn your budget inside out to find extra money to save for your down payment. You may also decide to enroll in an automatic savings plan at your bank to automatically have a set portion of your take-home pay transferred into savings. You might look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or stay local for your annual vacation.

Sell things you do not really need and find a second job. Maybe you can get a second job and build up your earnings. You can also get creative about the things you might be able to sell. A closet full of small things might add up to a nice sum at a garage or tag sale. You might also explore what any investments you own could bring if sold.

Borrow from your retirement plan. Research the details for your particular plan. It is possible to borrow money from a 401(k) for a down payment or make a withdrawal from an IRA. Make sure you understand about any penalties, the effect this could have on your taxes, and repayment terms.

Ask for a gift from family. Many homebuyers sometimes get down payment assistance from caring parents and other family members who are willing to help them get into their first home. Your family members may be pleased to help you reach the goal of buying your first home.

Research housing finance agencies. Special mortgage loans are provided to buyers in specific situations, such as low income purchasers or people planning to remodel houses in a specific part of town, among others. Working with a housing finance agency, you can get a below market interest rate, down payment help and other incentives. These types of agencies may help eligible buyers with a reduced rate of interest, get you your down payment, and provide other assistance. The principal purpose of non-profit housing finance agencies is to promote residence ownership in particular places.

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

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low and moderate-income individuals get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, ensuring the buyers are eligible for financing. Interest rates for an FHA loan generally feature the current interest rate, while the down payment amounts with an FHA mortgage will be less than those of conventional loans. The down payment can be as low as three percent while the closing costs could be financed in the mortgage.

  • VA mortgages

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which typically offers a competitive fixed rate of interest, no down payment, and limited closing costs. Although the loans are not actually issued by the VA, the office certifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Usually the piggyback loan takes care of 10 percent of the purchase amount, while the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, rather than putting the typical 20% down payment.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to loan you part of his own equity to help you get 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. Typically, this form of second mortgage has higher interest.

No matter your strategy of pulling together down payment funds, the thrill of reaching the goal of living in your own home will be just as sweet!

Want to discuss down payments? Give us a call at 1-844-MBROKER (1-844-627-6537).

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