Down Payment: Learn How To Put It Together

With regular mortgage loans it is usually necessary to pull together a suitable down payment that often implies up to 20% of the purchase price of the property. Therefore if you do not qualify for spe…

With regular mortgage loans it is usually necessary to pull together a suitable down payment that often implies up to 20% of the purchase price of the property. Therefore if you do not qualify for special mortgage loans such as VA loans or subsidized home loans you will have to find a way to raise the money. Following are some methods for putting the down payment together that can be easily used by anyone willing to finance the purchase of their dreamed home or condo.

Saving The Money For a Down Payment

Undoubtedly, the best way to obtain the funds needed for a down payment is to save the money prior to applying for a home loan. We say it is the best because you will not incur in interests by doing so and you will actually have lower monthly payments, less home loan debt, etc. The process may or may not imply sacrifices depending on your financial situation but at some point you will be enjoying the benefits and you will understand that the sacrifices (if any) where worth it.

So, how you can increase your capability to save money? By reducing your expenses or increasing your income. For instance, let’s say that the household has two cars, by selling one you will be able to put aside the amount obtained with the sale but you will also increase your available income by getting rid of car loan payments, insurance payments, gas, maintenance, etc. But you may not have a second car, or any car for that matter, and saving money may be harder for you. If that is the case, you do not need to worry as there are other possibilities. Just remember that if feasible, the best way to make a down payment is to save the money by cutting on your unsecured debt and thus reduce your payments, eliminating unnecessary expenses, or increasing your income by getting a second part time job or running a home based business.

Piggyback or Combination Loans To Cover Down Payments

An alternative for obtaining the money needed for a down payment is to resort to piggyback loans or combination loans. These loans are based on equity and use the remaining equity on the property to finance the down payment. These home equity loans are easy to obtain but the interest rates charged for the money lent are higher and thus, the use of a home equity loan and the mortgage loan combined can result more onerous. However, when you make a down payment of at least 20% of the purchase price you do not need to buy private mortgage insurance and thus you will save those monthly payments which can let the overall installments unaltered.

Subsidized Loans With No Down Payments

Finally it is possible to obtain financing through subsidized mortgage loans without having to put money down. These no down payment loans are offered by the Veterans Administration, by the Federal Housing Administration, by Fannie Mae or Freddy Mac, and by other public and private agencies and non profit organizations. With these loans you will not need to worry about down payments as they will finance 100% of the purchase price of the property.

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