March 2019

Low Down Payment Mortgage Options

If a sizable down payment is the only obstacle between you and your first home, good news awaits. You might believe that you need to build up a 20% down payment to buy a home, but that’s not true in most cases, especially for first-time home buyers. You might be able to get a no (or very low) down payment mortgage if you know where to look. 

The pros and cons of a larger down payment

There are some benefits to building up a larger down payment, but the costs of sticking with rental property are high. When you live in a rental, you’re not accruing equity because you don’t own an appreciable asset. Moving from an apartment or rental house to a home that you own is an investment in your future.

With a down payment of 20% or more…

  • You should get lower mortgage rates 
  • Your monthly payments will be lower due to the lower loan principal
  • You won’t have to purchase PMI (private mortgage insurance)
  • Your closing costs will be lower

With a down payment of less than 20%…

  • You can buy a home sooner rather than later
  • You need less cash to take out the loan
  • Your overall loan costs will be higher in the long-run
  • You can keep some cash reserves for unexpected expenses

Next, let’s look at low down payment home loan options and mortgages. Depending on the mortgage lender and mortgage company, you might be able to make your home purchase sooner and for less money down.

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Loan programs for no-down payment

There are several programs that can help you get into a mortgage with a $0 down payment.

  • VA Loan – These loans are for veterans, active duty military personnel, qualified Guard and Reservists, a and surviving spouses and require no down payment in many cases.
  • Native American Direct Loan – These loans are like VA loans but are for those with tribal affiliation building or buying a loan or tribal loan. 
  • USDA Loan – These loans are for families in rural and suburban areas with priority given to those of lower income, and that can’t get a loan elsewhere.
  • State Specific Home Buyer Grants and Programs – These loans vary widely by state so speak to a Get A Rate Home Loan Expert to find out what grants and programs available in your state.

Loan programs for a lower down payment

There are more programs to help you get into a home loan with a modest down payment.

  • HomeReady – This Fannie Mae loan program offers 3% down payment for lower to moderate-income buyers, and they’ll accept lower credit scores.
  • HomeOne – This Freddie Mac mortgage allows 3% down payments for first-time buyers purchasing a single-family home.
  • FHA 203(k) – These loans require just a 3.5% down payment and allow first-time homebuyers to buy fixer upper homes and make needed repairs. 
  • FHA – With down payments as low as 3.5% and lesser credit requirements, these are a great option for many first-time homebuyers.
  • Energy-Efficient Mortgage (EEM) – These are loans for those that are buying energy efficient homes with a down payment of 4% in most cases.
  • Good Neighbor Next Door – This HUD mortgage program is for teachers, first responders, fire, emergency, and law enforcement personnel and offers down payments as low as $100.

To get a personalized rate quote in under a minute click here.

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