Tips for Accumulating a Down Payment

   SAVE Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a couple of years for their down payment.

   BORROW THE DOWN PAYMENT FROM YOUR RETIREMENT PLAN Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.

   MOVE You may be able to save additional funds if you move into less expensive housing.

   REDUCE OTHER HIGHER INTEREST RATE DEBT Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.

   MAKE A DEAL WITH THE SELLER In some circumstances, it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.

   SELL SOME INVESTMENTS 

   GET A SECOND JOB AND SAVE YOUR EARNINGS.

   SKIP A YEAR'S VACATION.

   GIFT FROM THE FAMILY
Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.

Alternative Sources
   NO-DOWN AND LOW-DOWN MORTGAGES
     o FHA Loans
     The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing      and Urban Development (HUD), plays a significant role in helping low- to      moderate-     income families qualify for mortgages. FHA assists first-time buyers and      others who would not qualify for a conventional loan, by providing mortgage insurance      to private lenders. Interest rates for an FHA loan are usually the going market rate,      while the down payment requirements for an FHA loan are lower than conventional      loans. The required down payment can be as low as 3 percent and the closing costs      can be included in the mortgage amount.
     
      o VA Loans
     VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons      and veterans can qualify for a VA Loan, which usually offers a competitive fixed      interest rate, no down payment and limited closing costs. While the VA does not issue      the loans, it does issue a certificate of eligibility required to apply for a VA loan.
     
      o Piggy-back Loans
     A second mortgage that closes with the first. Often the first mortgage is for 80% of the      purchase price and the "piggyback" is for 10%. The home buyer covers the remaining      10% with their down payment. (Some lenders will write a second mortgage of 15% or      even 20% of the purchase price.)

    "CARRY BACK" MORTGAGE
     In the case of the seller "carrying back a second mortgage", the seller loans you part      of his or her equity. In this scenario, you would finance the majority of the loan with a      traditional mortgage lender at Winston Salem, Clemmons, Lewisville, Buena Vista,      Advance, Pfafftown, Bermuda Run, N.C. or anywhere else and finance the remaining      amount with the seller. Typically you will pay a slightly higher interest rate on the loan      financed by the seller.

   HOUSING FINANCE AGENCIES
     These agencies offer special loan programs to low-and moderate-income buyers      interested in rehabilitating a home in a targeted area in the Winston Salem,      Clemmons,      Lewisville, Buena Vista, Advance, Pfafftown, Bermuda Run, N.C. or      anywhere else, and      other groups as defined by the agency. Working through a      housing finance agency,      you can receive a below market interest rate, down      payment assistance and other      incentives.
     
     The primary mission of Housing Finance Agencies is to boost home ownership in      targeted areas, among first-time buyers at Winston Salem, Clemmons, Lewisville,      Buena Vista, Advance, Pfafftown, Bermuda Run, N.C. or anywhere else, and those with      little money for down payments. Most of these non-profit agencies were funded with      state government seed money and now operate independently.
     

   DOCUMENTING YOUR DOWN PAYMENT
Documenting that the down payment comes from your savings and that you will have savings and/or assets over and above the down payment gives the lender confidence in your strength as a borrower and your ability to repay the loan.

Take extra care to document the sources for any monies to be used for the down payment or closing costs.

Acceptable Down Payment & Closing Costs Sources

   Cash in a bank account
   Mutual funds / stocks / IRA / 401K
   Proceeds from the sale of another property
   Gift from an immediate relative