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Mortgage programs typically require a 20 percent down payment, but few people have that much cash reserved. There are some home loan products that require less, such as FHA loans that require 3.5 percent down, but the larger the down payment, the lower the mortgage will be. Here are some great tips for your down payment.
1. Receive a larger tax refund.
If you have difficulty saving money, you can decrease the number of withholding exemptions you claim on your employer’s tax form. While your paycheck will be reduced due to your employer paying more to the I.R.S., this could ensure a large tax refund.
2. Make regular deposits into a savings account.
Many employers offer to pay employees through direct deposit with the option to deposit certain amounts into multiple accounts. If you were to contribute $200 from a biweekly paycheck, you would have saved $5,200, excluding interest, after a full year.
3. Ask the home seller to contribute.
If you pay the seller’s a
sking price, you could be surprised at what they will do for you. They may be willing to give you the down payment as a credit, pay your closing costs or do both. Consult with your lender before asking, as certain restrictions may apply.
Those who have served in the armed forces may qualify for a VA loan, and the government has several down payment assistance programs for first-time homebuyers. Some counties also offer special programs to increase homeownership in certain neighborhoods. Consult with your lender to learn what options are available to you.
