Building Your Down Payment

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Many borrowers qualify for a mortgage loan, but they don't have a lot of money to put up the standard down payment. Do you want to look into getting a new house, but don't know how you should get together your down payment?

Cut expenses and save. Look for ways to trim your monthly expenditures to put away money for a down payment. Also, you can look into bank programs through which a portion of your take-home pay is automatically transferred into a savings account every pay period. You would be wise to look into some big expenses in your spending history that you can do without, or trim, at least temporarily. For example, you might decide to move into less expensive housing, or skip a family vacation.

Sell things you do not need and get a second job. Maybe you can get an additional job and build up your earnings. You can also get serious about the possessions you actually need and the things you might be able to put up for sale. A closet full of small items might add up to a nice sum at a garage or tag sale. Also, you might want to look into selling any investments you hold.

Borrow from retirement funds. Investigate the provisions of your particular program. Some homebuyers get down payment money by withdrawing from their Individual Retirement Accounts or taking funds out of 401(k) plans. Make sure you understand about any penalties, the effect this will have on taxes, and repayment obligation.

Ask for help from members of your family. First-time homebuyers are often lucky enough to get help with their down payment assistance from gracious family members who are anxious to help get them in their first home. Your family members may be eager to help you reach the milestone of buying your own home.

Contact housing finance agencies. Special mortgage loans are offered to homebuyers in specific situations, like low income homebuyers or homebuyers planning to remodel houses in a targeted neighborhood, among others. With the help of this kind of agency, you can be given an interest rate that is below market, down payment assistance and other perks. These kinds of agencies can assist eligible homebuyers with a lower interest rate, help with your down payment, and offer other assistance. The central mission of not-for-profit housing finance agencies is promoting home ownership in particular areas.

Research no-down and low-down mortgage loans.

  • FHA mortgage loans

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low to moderate-income buyers get mortgage loans. 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, making the buyers eligible for a mortgage. Interest rates for an FHA mortgage are typically the current interest rate, but the down payment with an FHA loan will be below those of conventional loans. The required down payment can go as low as three percent and the closing costs could be financed in the mortgage loan.

  • VA mortgages

    Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan does not require a down payment, has reduced closing costs, and offers a competitive rate of interest. While the mortgages are not actually financed by the VA, the department certifies applicants by issuing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes at the same time as the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. In contrast to the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.

  • Carry-Back loans

    In the option of the seller "carrying back a second mortgage," the you borrow part of the seller's home equity.. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Usually you'll pay a somewhat higher rate on the loan from the seller.

The feeling of accomplishment will be the same, no matter how you manage to put together the down payment. Your brand new home will be your reward!

Want to discuss the best options for down payments? Give us a call at 714-737-6717.

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