Building Your Down Payment

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Lots of folks who would like to buy a new home qualify for a mortgage loan, but they can't afford a large down payment. Here's where to get started

Tighten your belt and save. Be on the look-out for ways to trim your monthly expenditures to set aside money for a down payment. Also, you can look into bank programs through which some of your take-home pay is automatically transferred into a savings account every pay period. Some practical methods to save additional funds include moving into housing that is less expensive, and staying home for your family vacation this year.

Work a second job and sell things you don't need. Try to find a second job. This can be exhausting, but the temporary difficulty can provide your down payment money. You can also get serious about the possessions you actually need and the things you may be able to sell. You may own desirable items you can sell at an online auction, or household items for a tag or garage sale. You could also look into what your investments will bring if sold.

Borrow funds from a retirement plan. Research the specifics for your particular plan. It is possible to take out money from a 401(k) for you down payment or get a withdrawal from an Individual Retirement Account. Be sure you know about any penalties, the way this may affect on your income taxes, and repayment obligation.

Ask for help from members of your family. Many buyers are sometimes lucky enough to get down payment assistance from thoughtful family members who may be willing to help get them in their first home. Your family members may be happy at the chance to help you reach the goal of having your first home.

Learn about housing finance agencies. These types of agencies offer special mortgage programs for moderate and low income homebuyers, buyers with an interest in rehabilitating a residence within a specific area, and other specific types of buyers as defined by each finance agency. With the help of a housing finance agency, you can receive an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies may help eligible homebuyers with a reduced rate of interest, get you your down payment, and provide other assistance. The primary goal of not-for-profit housing finance agencies is boosting home ownership in specific places.

Learn about low-down and no-down mortgages.

• Federal Housing Administration (FHA) loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in helping low to moderate-income individuals get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in qualifying for mortgage loans. FHA assists first-time buyers and others who may not be able to qualify for a typical mortgage loan by themselves, by providing mortgage insurance to private lenders. Interest rates for an FHA mortgage are normally the current interest rate, but the down payment with an FHA loan are below those of conventional loans. The down payment may be as low as three percent while the closing costs can be financed in the mortgage.

• VA mortgages

  With a guarantee from the Department of Veterans Affairs, a VA loan is offered to veterans and service people. This particular loan does not require a down payment, has minimal closing costs, and provides the benefit of a competitive rate of interest. Even though the mortgages don't originate from the VA, the department certifies applicants by providing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan takes care of 10 percent of the home's price, while the first mortgage finances 80 percent. In contrast to the traditional 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

• Carry-Back loans

  We a seller carries back a second mortgage, the seller loans you part of his or her equity. The buyer finances most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Generally, 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 come up with your down payment. Your new home will be your reward!