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Building Your Down Payment

Many people who are looking to buy a new house qualify for various loan programs, but they can't afford a large down payment. Here are a few ideas:

Cut expenses and save. Turn your budget inside out to find ways you can cut expenses to save for your down payment. There are bank programs in which some of your take-home pay is automatically transferred into a savings account each pay period. Some effective ways to put together funds include moving into housing that is less expensive, and skipping a year's vacation.

Sell items you don't need and find a second job. Try to get a second job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the things you can sell. Multiple small items might add up to a fair amount at a garage or tag sale. You can also look into what your investments could bring if sold.

Tap into your retirement funds. Check the provisions of your particular program. It is possible to borrow money from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Make sure to learn about the tax consequences, repayment terms, and any early withdrawal penalties.

Request a generous gift from your family. First-time homebuyers are sometimes fortunate enough to get down payment assistance from thoughtful parents and other family members who are prepared to help them get into their first home. Your family members may be pleased to help you reach the milestone of owning your first home.

Contact housing finance agencies. These agencies extend special mortgage loans to low and moderate-income homebuyers, buyers with an interest in remodeling a house in a specific part of the city, and other certain types of buyers as specified by each agency. Financing through this type of agency, you may be given a below market interest rate, down payment assistance and other incentives. These types of agencies can assist you with a reduced interest rate, help with your down payment, and offer other assistance. The primary mission of not-for-profit housing finance agencies is to boost home ownership in specific places.

Learn about low-down and no-down mortgage loan programs.

• FHA mortgage loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low to moderate-income families get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who wish to get home financing. FHA aids first-time homebuyers and others who would not be able to qualify for a conventional mortgage on their own, by providing mortgage insurance to the lenders. Interest rates with an FHA loan generally feature the market interest rate, while the down payment for an FHA mortgage will be lower than those of conventional loans. Closing costs might be covered by the mortgage, and your down payment can be as low as 3 percent of the total amount.

• VA mortgages

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which usually offers a competitive rate of interest, no down payment, and reduced closing costs. Even though the mortgages don't originate from the VA, the office verifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with 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. The homebuyer pays the remaining 10%, instead of putting the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller commits to lend you a piece of his home equity to assist you with your down payment funds. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Often, this type of second mortgage will have a higher rate of interest.

The satisfaction will be the same, no matter which approach you use to come up with your down payment. Your brand new home will be your reward!