How to Come Up With a Down Payment

How to Come Up With a Down Payment Down payments on a home show lenders that you are responsible with your money. They also give lenders an added sense of security, since they are not having to issue a loan for the full value of your new home.

Being able to put a down payment on a home opens up options that help you find the perfect place to live. You may even be able to enjoy benefits such as not having to pay private mortgage insurance, if you can afford to put a large payment down on the house.

While you may understand the benefits of making a down payment, it is easy to feel overwhelmed when you think about having to save a large sum of money. Now that you are eager to buy a house, you can use these strategies to come up with the funds faster.

Determine How Much You Need to Put Down

A typical down payment is usually between 10 – 20% of the price of the home. However, paying at the higher end of these numbers provides you with the most benefits, and it allows you to stand out to more lenders.

Start by determining the average cost of a house within your desired neighborhood. Then, do the math to determine what 20% down would be for a home in your price range. You can then use this figure as a starting goal for your savings.

Explore the Different Types of Home Loans

You may be able to put a lower down payment on a house, or even avoid having to pay one completely.

There are several types of loan options that you may be eligible for that change what is expected by lenders for down payments. For instance, an FHA loan lets first-time home buyers put as little as 3.5% down on a loan.

Cut Back On Unnecessary Expenses

Most people have some fat that they can trim from their budgets. For instance, you may not really need to buy that pricey cup of coffee on the way to work when you can make a pot at home for less money. You may also have room in your cable or phone bill to trim expenses.

Keep in mind that your credit cards may be one of the biggest expenses in your budget. If possible, pay down your balances so that you have one less payment to make each month.

This not only makes your credit look better, but you can put what you used to pay toward saving for a down payment.

Check Out Your Retirement Plan

How to Come Up With a Down PaymentWhile it is usually best to leave your retirement funds untouched, you may decide that it is worth withdrawing a portion of the balance to buy your home. This may be true for you if you spend more money to rent than you would on a home mortgage payment.

Keep in mind that you may be restricted regarding how much you can take out. For instance, the IRS allows you a one-time opportunity to withdraw up to $10,000 from a traditional IRA for buying a home if you fall within their guidelines for being a first-time homeowner.

If you do choose this route, consider using the savings that you generate by no longer paying higher rent costs to replenish the fund later on.

The amount you put down on a house will vary according to several factors, such as your eligibility for government-backed homebuyer programs. Always begin with the end in mind; talk to our loan specialist about what you need to begin saving up for the house of your dreams.

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Buy a House With Low to No Down Payment – Here’s How

How to Buy a House With Low to No Down PaymentOne of the factors that make it most difficult for individuals or couples to become homebuyers is coming up with a big down payment. Commonly, 20%, which is common at many banks, on a $100,000 loan is $20,000.

To some, that amount may as well be $100,000 because it’s almost impossible! Fortunately, there are many options available today for potential homebuyers.

Loan Options with Low or No Down Payment

Here are some excellent loan options that offer low or no down payments to eligible applicants.

VA Loan

Offered through the Department of Veterans Affairs, the VA mortgage loan is a zero-down loan available to current or former military personnel. Although applicants can put a down payment down if they so wish, there is no down payment required.

VA loans do not require excellent credit, and they offer 100% financing. They are even available to those who have been in the National Guard or Reserves for at least six years.

First time home buyers may be required to pay a 2.15% loan fee upfront. Mortgage insurance is not required with VA loans, which alone can save homebuyers hundreds of dollars.

FHA Loan

Offered through the Federal Housing Administration, the FHA loan is probably one of the most popular home mortgage loan types for several reasons. It only requires a 3.5% down payment, and the down payment can come from a gift or an approved non-profit organization.

Borrowers do not need good credit to be approved for an FHA loan. While this may vary by lender, credit scores typically can be as low as 580 with an FHA loan.

FHA loans do require two types of mortgage insurance. One type, 1.75% of the loan, is paid upfront, and the other type, 0.85% is added to the mortgage and paid each month. Mortgage insurance can be canceled when the home reaches 20% equity.

Another big benefit of FHA loans is that their interest rates are substantially lower than conventional mortgage loans.

HomeReady Mortgage®

Backed by Fannie Mae, the HomeReady Mortgage® is a conventional loan type that offers low down payments to eligible borrowers. Borrowers can pay down payments as low as 3%.

The HomeReady Mortgage® is not just for first-time home buyers, but is open to all buyers who meet the requirements. Although borrowers of all incomes can benefit from this mortgage, it’s aimed at helping those with low and moderate incomes.

Because this is a government-backed loan, borrowers also get lower interest rates. It’s typically for borrowers who have a household income 80% less than the median income in that area. The home’s census must meet certain requirements.

Home Possible Mortgage®

The Home Possible Mortgage®, which is backed by Freddie Mac, is a conventional mortgage loan that requires potential borrowers pay as little as 3 percent down payment. Borrowers can have less than perfect credit scores and can have income from non-traditional methods.

Although Home Possible Mortgage® is designed to help low-to-moderate-income home buyers, it’s open to all incomes as long as they meet the eligibility requirements.

When you’re ready to take the plunge, or even if you’re just thinking about it, stop and visit us or give us a call. Our loan specialists are First Choice Loan Services are always ready to help you and show you what we have to offer.

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