It is sometimes disheartening to see most of us get weighed down by our problem on down payment preventing us to transition from a renter to a homeowner. With the way things are going in the real estate market, it seems we are getting even farther away from our dream home.

Your available equity that is used as down payment will have bearing on the types of loans which you can attain. In general, a traditional or generic mortgage loan, one that is guaranteed by Freddie Mac or Fannie Mae, would require a minimum equity of 5% from the home buyer as a cash down payment. This increase in the bottom protective cap is in response to the falling values of real estate in most states in a predominantly declining real estate market.

Tips in Securing a Down Payment

1. Use Your Personal Savings
Make a serious effort to save up for your down payment by reducing your monthly expenditures. It would be wise to enroll in an automatic savings plan with your bank where a fixed portion of your payroll is automatically deducted and transferred to your savings account.

2. Borrow From Your Retirement Plan
Study the provisions of your retirement plan. You can qualify for a policy loan from a 401(k) plan which you can use as down payment. You may also opt to withdraw funds from your Individual Retirement Account. When you decide to use either of these two approaches, be sure that you understand the tax consequences, attendant penalties and charges, as well as applicable repayment terms.

3. Use Gift Money from Family for Down Payment
Your parents and other members of your family may be willing to help you out in raising the amount required for down payment. They may give you a gift to cover a portion or the entire amount of down payment.

4. Borrow From Your Employer
You employer may also have some funds for you to borrow which you may use as down payment. Some employers extend small loans based on payroll deductions to be used by their employees to cover portion or the entire amount of down payment.

5. Grants from Down Payment Assistance Charities
There are charities that extend to qualified home buyers money for down payment that does not have to be repaid. The home buyer-grantee, however, are required to contribute to the fund an equal amount upon closing or soon after closing. This can be a great option for those who don’t have other options available in securing a down payment.

6. CHDAP, ACCESS & Other Loans
These financial programs are supported by Federal, State or City bond programs. It usually comes with an upper cap based on the household size. Eligible home buyers are provided with a low interest second and third mortgage which can be used for a specific type of loan program.

7. ‘Carry-Back’ Type of Mortgage
You can make arrangements with the seller to loan you part of his equity. In this scenario, the seller agrees to “carry back a second mortgage” from the sale of the real estate property. In this setup, you get financing for the majority of the loan from a traditional mortgage lender and finance the remaining balance with the seller of the real estate property. This is an attractive term of the deal which you can toss up on the negotiation table with the seller. Under the prevailing circumstances, the seller would most likely accede to this arrangement just to lock in the deal.

Author: Ryan Tollefsen
Article Source: EzineArticles.com
Provided by: Duty tariff

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