buying a house for the first time

Get the house you want: Low and no-down-payment mortgages

Bethany RamosFirst-Time Homebuyer, Home Buying, Loan Types

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If you guessed that the biggest hurdle standing in the way of prospective homebuyers is the down payment, you’d be right.

According to Freddie Mac:

“The most damaging down payment myth — since it stops the homebuying process before it can start — is the belief that 20 percent is necessary.”

While there are benefits to putting 20-percent down if you have it, it may ease your mind to know that the typical buyer is putting down much less. As the Profile of Home Buyers and Sellers from the National Association of REALTORS® (NAR) shows, 20 percent hasn’t been the median down payment for over 15 years (since 2005).

Today, the median down payment is only 13 percent, dropping to just 7 percent for first-time buyers. Once you add low and no down payment mortgage programs into the mix, the upfront cost of buying becomes even cheaper.

Which home loans have the lowest down payments?

You may be amazed. Many homebuyers miss out since few are aware that these types of low and no down payment loan programs exist:


  • A USDA loan is available to rural and suburban homebuyers. The U.S. Department of Agriculture (USDA) issues mortgages to applicants deemed to have the greatest need. You can search here for USDA-eligible areas.
  • A USDA loan requires no down payment and allows the seller to pay up to 6 percent of closing costs/prepaids. Using this loan, there’s no maximum on a property’s purchase price, but income limits apply.
  • Even better, a USDA loan doesn’t require private mortgage insurance (PMI), only a one-time and an annual guarantee fee paid monthly as part of a mortgage payment.

Your estimated minimum down payment: No money down

2. VA

  • Homebuyers who’ve currently or previously served in the military often gravitate toward the zero-down VA home loan, backed by the Department of Veterans Affairs.
  • This is because total financing may be available for those who qualify. Flexible credit requirements, lower rates, and no mortgage insurance also make this loan program attractive. And, the full amount in gift funds is permitted.
  • A funding fee of up to 2.3 percent for first-time buyers and up to 3.6 percent for subsequent buyers may apply, contingent on details like military branch and the number of times of a VA loan has been used. Fortunately, this funding fee can be rolled into the total loan balance.

Your estimated minimum down payment: No money down

We’re here to make buying a house easy. Just click to prequalify for your mortgage from anywhere.

3. Good Neighbor Next Door

  • The Good Neighbor Next Door Program was created for the helpers among us: Firefighters/EMTs, nurses, teachers, and police officers who meet loan program requirements may be eligible to buy HUD Homes at half-price.
  • An HUD Home is a foreclosed home financed by the FHA (Federal Housing Administration), currently owned by HUD. Eligible buyers who finance their mortgage using an FHA loan may drop the down payment significantly — to only $100 minimum.
  • Once a property is purchased, the discounted amount of 50 percent will be treated as a silent second mortgage, without interest or payments. The only stipulations? A buyer must choose an approved property on the HUD list and live in a home for at least three years.

Your estimated minimum down payment: $100

4. HomeReady®

  • For eligible buyers, it could be possible to get into the home you have your eye on for as little as 3-percent down. Along with a low down payment, Fannie Mae’s HomeReady® program has flexible loan requirements, as well as a mortgage insurance add-on.
  • HomeReady® is inclusive of multigenerational households; the income of every resident in a home can be used to qualify. Down payment and closing costs can also be covered by gifts and Community Seconds®.
  • With this kind of loan, manufactured homes and high-balance mortgages are ineligible. But low-income first-time and repeat homebuyers are invited to apply.

Your estimated minimum down payment: 3 percent minimum

5. FHA

  • Since 1934, FHA loans have helped millions become homeowners. Insured by the Federal Housing Administration, FHA loans are popular among first-time buyers since they typically have lower down payment and more flexible credit requirements than non-government-backed loans.
  • In most circumstances, an FHA mortgage only requires a 3.5-percent down payment minimum; upfront and annual mortgage insurance apply. Buyers with credit scores below 620 typically benefit from an FHA mortgage.
  • FHA down payment funds can also be gifted, borrowed from an eligible 401(k), or come from down payment assistance (see number 7 below).

Your estimated minimum down payment: 3.5 percent minimum

6. Conventional

  • Most homebuyers have heard of this loan before: A conventional home loan is the most common mortgage option that normally offers the most competitive interest rates.
  • A homebuyer may be eligible for as low as a 3-percent minimum down payment. Nevertheless, a conventional mortgage is where the “20-percent rule” originated; a 20-percent down payment is standard. But down payment/closing costs can be gifted.
  • Overall, homebuyers with credit scores above 620 are generally better suited to conventional loans, such as the Conventional 97. Remember that when agreeing to a low down payment, mortgage insurance also applies.

Your estimated minimum down payment: 3 percent minimum

7. Down Payment Assistance

  • Down Payment Assistance (DPA) programs can help fund a mortgage down payment, coming from grants, loans, or similar programs. Here’s where you can search for assistance by state.
  • All homebuyers should check for down payment assistance programs in their area; it’s possible to receive as much as $120,000 from your city or county for buying a home, depending on income and other requirements.
  • If an eligible buyer stays in a home for at least five years, many grants — not to be confused with loans — won’t have to be paid back. (Read more here about DPA and other ways to reduce your down payment.)

Your estimated minimum down payment: The average DPA amount is $11,565.

With so many low and no down payment mortgage options to choose from, it’s safe to say the 20-percent down payment myth has been busted. To be clear, putting down 20 percent on a home is a wise choice if you have the funds available. But if you’re ready to make your dreams of homeownership a reality, there’s no need to let a number hold you back.

How low can your down payment go?

Start by talking to your lender. Once you prequalify and find out how much house you can afford, your loan officer will walk you through your affordable down payment options. If a down payment is needed, they can help you come up with a reasonable, short-term plan for saving.

For educational purposes only. Please contact your qualified professional for specific guidance. 

Sources are deemed reliable but not guaranteed.

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