How to get a low or $0 down payment mortgage

You could land a home for as little as 3% or even zero down. But you may have to dig a little deeper to find these loans, and you’ll still need to cover closing costs and other fees. We explore your options when it comes to low- or no-down-payment mortgages.

Can I get a low- or 0%-down mortgage?

Yes. There are low- or 0%-payment mortgage options available for eligible homebuyers that can save you money up front, including:

• FHA loans — 3.5% down. Ideal for first-time homebuyers and lower credit scores
• VA loans — 0% down. Ideal for service members and their families
• USDA loans — 0% down. For those looking to purchase a rural home
• Conventional loans — 3% down. Good for higher credit score buyers
• The HomeReady Mortgage — 3% down. Suitable for low- to moderate-income buyers
• The Home Possible Mortgage — 3% down. Good for low- to moderate-income buyers
• Specialized loans from banks and credit unions — 0% to 3% down. Good for low- to moderate-income buyers

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How much could I save with a low-down-payment mortgage?

It depends on your situation. Let’s say you have an average credit score and want a $300,000 mortgage. If you were required to put down 20%, you’d have to come up with $60,000. But if you qualify for an FHA loan, you’d only need 3.5% down, or $10,500.
With that in mind, let’s take a closer look at each type of low-down-payment loan and their requirements.

Types of low-down-payment mortgages

Before applying for a low- or no-money-down loan, get familiar with the nuances of the different types available to you.

FHA loans: 3.5% down

FHA loans are guaranteed by the Federal Housing Administration and issued by approved lenders. FHA loans are popular with first-time homebuyers and those with lower credit scores due to their more lenient lending criteria compared to other types of loans.

FHA loan requirements	Fees and information
3.5% down payment Minimum credit score of 580 For credit scores between 500 and 579, you still might qualify with 10% down	Required up front, one-time mortgage insurance premium of 1.75% of the total loan amount Required monthly insurance premium (MIP), which can range from 0.45% to 1.05% of the loan’s value, depending on the loan term, purchase amount and loan-to-value (LTV) ratio

VA loans: 0% down

VA loans are backed by the US Department of Veterans Affairs and available to qualifying veterans, active-duty service members, members of the National Guard and Reserves and their families. VA loans offer up to 100% financing with no down payment or PMI required.

VA loan requirements	Fees and information
Borrowers must meet the basic service requirements of the VA Credit score between 580 and 620 or above	Funding fee requirement of 2.3% of the total loan amount VA loans don’t have a lending limit, except for what the lender imposes

USDA loans: 0% down

Backed by the US Department of Agriculture, USDA loans are a no-down-payment mortgage option for homes in certain rural areas as determined by the USDA. These loans are designed for first-time homebuyers.

USDA loan requirements	Fees and information
Credit score of at least 640 Adjusted household income of 115% or less of the area median income	1% upfront guarantee fee that can be rolled into the total loan amount 0.35% annual guarantee fee

Conventional loans: 3% down

A conventional loan is a home loan that’s not backed by the government. It may be harder to qualify for a conventional loan than a government-backed loan. But with a conventional loan, there’s no upfront mortgage fee and the monthly insurance payments are generally cheaper.

Conventional loan requirements	Fees and information
3% down in most cases Credit score of 620 or higher Debt-to-income ratio of 50% or lower	If your down payment is less than 20%, you’ll need to pay PMI, which can range from 0.5 to 1% of your loan amount annually

HomeReady Mortgage and Home Possible Mortgage: 3% down

The HomeReady Mortgage by Fannie Mae and Home Possible Mortgage by Freddie Mac are both mortgage loan products designed for low- to moderate-income borrowers. With these mortgages, funds for your down payment can come from flexible sources, including gifts, grants and employer-assistance programs — which means you don’t need to provide any personal funds yourself.

HomeReady & Home Possible loan requirements	Fees and information
Credit score of 620 or higher HomeReady: You must have an income below 100% of the area median income (AMI) Home Possible: You must have an income limited to 80% of area median income (AMI)	You’ll need to pay private mortgage insurance (PMI) on a HomeReady or Home Possible loan, but rates are capped

What is an area median income?

Area median income, or AMI, is a calculation from the US Department of Housing and Urban Development, or HUD, that determines the median area income of households in a specific region. AMI is used to determine borrower eligibility for low-income housing programs nationwide, like HomeReady and Home Possible. If you’re trying to qualify for a loan with an AMI limit, your income can’t exceed the AMI requirements set by the lender.

What’s the catch with a low-down-payment mortgage?

While putting less money down can help move you into a house sooner, in most cases you’ll have to pay PMI (private mortgage insurance) if your down payment is less than 20%.
PMI can cost up to 1% of your total loan amount each year — which can add up to several thousand dollars annually. That said, every lender sets its own rules, which means you could find one that accepts a lower down payment without requiring PMI, such as the PNC Bank Community Loan or the Navy Federal Credit Union’s Homebuyers Choice Loan.
But keep in mind that due to the higher financing requirements of low-down-payment loans, you may end up paying a higher interest rate and making bigger overall payments, which can eat into your monthly budget.

What if I still don’t have enough money for a down payment?

If a 3% down payment is a hurdle, consider these options:

• Research down payment assistance programs. Every state offers down payment assistance programs that could save you thousands, so it’s worth checking if you qualify for one. Availability and eligibility of these programs vary by state.
• Ask for gift funds. If you have generous family members, they may be able to gift you part of your down payment. How much can be gifted depends on the type of loan you’re applying for. For instance, FHA loans often allow a fully gifted down payment for approval.
• Get a cosigner. If a family member or friend owns their home and is willing to cosign your mortgage, you may be able to borrow more without having a lot of savings. With a cosigner, the bank secures your loan with the equity in your cosigner’s property. If you’re unable to repay your mortgage, however, the cosigner may be at risk of losing their own home.
• Secure your mortgage with existing property. If you already own a home in which you’ve built up equity, you may be able to secure a new mortgage with it. But if you have trouble paying back the mortgage, you risk losing your home.

Bottom line

If you’re ready to buy a home but your savings account is slim, compare multiple lenders to find one that fits your needs. Be sure to ask plenty of questions and to fully understand the terms, conditions, insurance requirements and any additional fees of your low-down-payment mortgage.