Ideas To Save For A Down Payment

In order to acquire a mortgage loan to finance the purchase of a property, you need to have sufficient cash to pay for the down payment. The usual rule has been a minimum of 10 percent of the property purchase price as a down payment.

Although the dollar value of a down payment is relatively high, obtaining the funds for it is not beyond reach. If you have the will power, there are ways in which you can save adequate funds to make that down payment for the property you desire.

If you are determined enough to get what you want, you most likely will. With determination comes motivation for you to save, limited only by the size of your paycheck and your dreams.

Make one savings account your “Down Payment Goal” and any extra cash, coins, money from presents, raises, taxes, part-time jobs, paid off debts, etc. go directly into that account.

One good way to put money aside is never to see it. You can have it automatically transferred to your ‘special’ account. With this, you will be certain that you will not be tempted to spend it and will not physically have to deal with it.

Make your money work harder for you. Put your money into a certificate with a higher interest yield. Also, your money will be tied down and you will not be able to withdraw it without a penalty, thus less tempted to take it out.

If you have been paying monthly installments for your car loan, credit cards or your education loan and have paid off one of these loans, continue paying yourself now the same amount. You will be living on the same funds, yet the money from the old bill will now go into your “Down Payment Goal” account.

Other Options If You Do Not Have Money For A Down Payment

Today is a frustrating time for people trying to purchase a home or for those in the mortgage business. There are now strategies for people who have money saved for down payments and other strategies for people who are practically broke.

There are so many plans now that have been developed; we shall only mention a few. It would be best to ask your realtor to explain what would be best for you.

No down payment loans have the disadvantage of requiring costly mortgage insurance. You can avoid this by getting a “piggyback loan”: a home equity loan that piggybacks on top of a primary mortgage.

The payment on the second mortgage equals what would have been the cost of mortgage insurance and the buyer can deduct the interest on their income taxes. These loans have zoomed in popularity in the past few years.

Another program is the Home Solution program where the seller ultimately contributes 3 percent for the down payment.

The home’s seller “donates” 3 percent of the home’s sale price to the nonprofit program, plus a fee. The nonprofit program then gives the buyer that 3 percent at closing, (used as a money gift which is accepted by the Federal Housing Administration) with the money serving as the down payment.

So, if there is a will there is truly a way.

Why Are Private Loans Growing?

People are looking for personal loans every day. And private student loan volume is growing much more rapidly than the federal student loan volume, which is difficult to understand given the benefits of the two. And remember, student loans are very different than guaranteed online personal loans.

If the current trends continue, annual private education loan volume will surpass the federal volume within a decade. It is very important that students have the correct tools they can use to compare the different private student loans to learn and understand the validity and scope of the one they choose.

It is also very important to keep in mind what the lender is looking for. The issues here will affect many factors of your personal loan. Students and other people come in and out of the door everyday and the lender is aware of the questions and the necessary feedback qualifying the borrower for the loan.

Impressing A Private Lender

The lender will want to know about your past record in finance such as bankruptcy and credit rating. If you have had problems in either of these areas you must be prepared to go with a secured loan. Here you have to be willing to put something up as collateral that the lender can take if you fail to pay back your loan.

The higher amount you plan on asking for, such as $15,000 or $20,000, (or even more because of the extreme cost of school) be prepared for private banks offering the loan to charge high interest rates on monies funded to borrowers.

Also, you need to work with your lender and build a good relationship so he or she knows what you are expecting. A loan such as this should be borrowed for a very short term. Otherwise this type of loan would not make sense.

Best Private Student Loans

Most of the above seems rather negative, and I agree. However, these are the items that would be first researched from a lender with a student starting college. Now let’s go on to the positive side of the picture regarding finding “your” best private student loan.

As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan, grants, work-study, Federal PLUS Loan, etc.

The fees charged by some lenders can significantly increase the cost of the loan. A loan with a low interest rate but high fees can ultimately cost more than a loan with a somewhat high interest rate and no fees. The lenders that do not charge fees often roll the difference into the interest rate. A good rule of thumb is that 3% is fees is about the same as a 1% high interest rate.

The best private student loans will have interest rates of LIBOR + 1.8% or PRIME – 1.00% with no fees. Such loans will be competitive with the Federal PLUS Loan. These rates often will be available only to borrowers with great credit who also have a creditworthy co-signer.

It is also not uncommon for lenders to advertise a lower rate for the in school and grace period, with a higher rate in effect when the loan enters repayment. So be aware and read, read and read some more.

Not To Worry About What Private Lenders Are Looking For

You will be able to find a lender for a private loan, that will not be your problem! There are many, many lenders that are more than willing to lend you money even over the Internet without ever seeing you. The problem will be what you will have to pay in return, and be held accountable for. That will be far more important for you in the long run.

There are two different kinds of Stafford Loans and both are administered by the U.S. Department of Education. The first is called the Federal Family Education Loan (FFEL) Program and the other one is called the William D. Ford Federal Direct Loan (Direct Loan) Program.

For either type of loan the terms and conditions are very similar. And the amount that you choose to borrow can be the same from the Direct Loan or the FFEL lender.

For either type of Stafford Loan application, you fill out a Federal Student Aid Application (FAFSA). Then you present it to your school for a review. After it is processed they will inform you about your results and loan eligibility.

If you are accepted for one of the loans you will be asked to sign a promissory note that lists the conditions under which you are borrowing the money and the terms under which you agree to repay the money.

For both of the Stafford Loans you will be paid through your school in two installments. No installment will exceed one-half of your loan amount. The money first must be applied for tuition and fees, (room and board in some cases) and other mandatory school charges.

If any money is left over, you will receive the money, usually by check, to do as you wish unless you have given the school written authorization to hold the extra money until later in the enrollment period or next enrollment.

Here is where the two loans start to differ. First, if you choose a Direct Stafford Loan, the money will be coming from the federal government. And repayment will be made to the U.S. Department of Education.

If you go with FFEL Stafford Loan you will need to choose a lender. Your school will have a list of borrowers that you can choose from or you may have your own source such as your personal bank or credit union.

Also, there can be a difference between the loans when it comes to repayment. You have a choice of repayment plans for either loan. Your monthly payment will depend on the size of your debt and the length of your repayment period.

Before considering any loan it would be best to purchase the booklet or ask your loan provider for a copy of: Funding Education Beyond High School: The Guide to Federal Student Aid.

This guide explains repayment options, examples of monthly payment for different loan amounts and combining Stafford Loans with other available loans. It covers many areas you need to know when trying to manage your coming expenses.

Once you have graduated or leave school or drop your enrollment below half-time you will be given a six-month grace period before you have to start repayment on your loans. During this time you will receive information regarding your first payment due date.

You will receive all the information you need regarding repayment plans during your initial session when you apply for you loan. This can be either through your school counselor, bank representative or institution you go through to obtain your loan.