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How to Compare No and Low Down Payment Mortgage Programs

How to Compare No and Low Down Payment Mortgage Programs

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

    There are many no and low down payment mortgage programs available to borrowers and we have outlined numerous programs in the char below.  Options include programs that are backed by the government such as the FHA, VA, USDA and HUD Section 184 programs and conventional programs such as HomeReady, Home Possible and HomeOne.  Plus, some larger banks offer their own programs.  With so many options to choose from, how do borrowers compare no and low down payment programs?

    While all of these loan programs have the same goal of helping you buy a home with little or no down payment, they also have unique features that make them different. These differences are designed to make the programs more appealing or applicable to different borrower segments. For example, some programs may only be available to first-time home buyers while other programs are also available to repeat home buyers. Some programs are focused on borrowers with lower incomes while others are accessible to people of all income levels. And some programs are better suited for borrowers with no or non-traditional credit profiles while others require higher credit scores.

    These are just several examples that demonstrate the potential differences in no and low down payment mortgage programs. Borrower should focus on the following factors to determine the program that is right for them:

    • Required down payment.  This is the part of the property purchase price you are required to make.  Depending on the mortgage programs, you can pay for all or part the down payment with your own funds or with a gift or down payment assistance program.  No and low down payment programs usually require you to put down zero to 3.5% of the purchase price.
    • Required personal financial contribution.  This is the part of the down payment that you are required to make using your own funds.  Some no and low down payment programs enable you to buy a home with no personal financial contribution because you can use a gift or home buyer assistance program to pay for your down payment and closing costs.  Be sure to understand how much of your own money you are required to contribute when you buy a home.
    • Minimum credit score.  Most no and low down payment programs apply a minimum borrower credit score that you must meet to qualify.  The FHA mortgage program permits the lowest credit score while the NACA mortgage program requires no credit report.  Some programs also allow borrowers with no credit history or non-traditional credit profiles.
    • Maximum debt-to-income ratio.  This is how much of your monthly gross income you are allowed to spend on your mortgage payment and other monthly debt expenses.  The higher your debt-to-income ratio applied by the program, the higher the loan amount you qualify for.  Debt-to-income ratio limits vary by lender and mortgage program.
    • What types of property are eligible?  Some no and low down payment programs only allow you to buy single family properties but other programs enable you to purchase multi-family properties up to four units, as long as you live in the property.  Qualification requirements may also be different for condos and co-ops so understand the property eligibility requirements for your specific program.
    • Borrower income limits.  Some programs apply borrower income limits that cap how much money you can make to qualify.  For example, the USDA home loan program limits an applicant;s household income.  Income limits are usually based on the area median income for the county in which the property being financed is located.  If you make too much money you may not be eligible for the program.
    • Loan limits.  Most no and low down payment mortgage programs apply limits that cap what size mortgage you can obtain.  Loan limits can be restrictive for borrowers who live in more expensive housing markets.  The loan limits usually vary by county and the number of units in the property.  The FHA mortgage program uses its own limits while most other programs use the conforming loan limit.  
    • Is mortgage insurance required?  Many no and low down payment programs require borrowers to pay an upfront or ongoing mortgage insurance fee, and in some cases borrowers are required to pay both.  Mortgage insurance is an extra cost on top of your monthly mortgage payment and closing costs so you should understand if this additional cost applies to you.
    • If required, is the mortgage insurance cancelable?  If you are required to pay mortgage insurance you should determine if it is cancelable after a certain period of time.  Private mortgage insurance (PMI) for conventional loan programs is usually removable after you have enough equity in your home (at least 20%) while you are required to pay FHA mortgage insurance premium (MIP) and USDA home loan guaranty fees for their entire mortgage, regardless of how much equity in you have in your home.
    • Are you required to live in the property?  Most of the mortgage programs below require that applicants occupy the property at the time your loan closes.  This makes it challenging to use a no or low down payment program to buy a rental property. 
    • How does the mortgage rate compare to other programs?  Government-backed no and low down payment mortgage programs including the FHA, VA and USDA programs charge a lower mortgage rates while other programs charge a higher rate, especially for borrowers with lower credit scores.  Make sure to compare mortgage rates to find the most affordable program.
    • First-time buyer or repeat buyer? If you are a repeat home buyer make sure that you qualify for the program.  Please note that  you usually qualify as a first-time home buyer as long as you have not owned a home within the past three years.
    • Are you required to pay extra program costs?  No and low down payment programs may require extra time and effort by lenders or program administers so borrowers are required to pay extra fees to apply.  These extra fees are relatively uncommon and borrowers should try to avoid them if possible.    
    • Is the program available for both home purchase loans and refinances?  Most no and low down payment mortgage programs apply to both home purchase loans and refinances but some only apply to buying a home.  If you are looking to refinance your mortgage make sure this is permitted according to program guidelines. 
    • What lenders offer the program?  Most of the programs below are offered through approved lenders while some are offered directly through government and non-profit housing organizations. The last column of the table indicates the lenders or organization that offer each program.
    • Home buyer counseling class.  Many of the programs below require borrowers to take a home buyer counseling class to prepare you for getting a mortgage and owning a home.  You are usually required to pay a small fee to take the class.

    Use the FREEandCLEAR Lender Directory to find lenders that offer wide range of low down payment mortgage programs.

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  • With so much information to sort through, the chart below compares the key qualification requirements for no and low down payment mortgage programs.  The chart provides a summary of each program and compares important loan features including borrower eligibility, credit score, debt-to-income ratio, mortgage rate and extra fees.  The chart also shows you if the program applies loan limits and borrower income limits and lets you know if you are required to pay mortgage insurance.  Comparing low and no down payment programs enables you to understand their positives and negatives and select the mortgage that is right for you.  We also recommend that you click on the program title to review extensive information about each program.

  • Program Summary Borrower Eligibility Property Eligibility Interest Rate Extra Borrower Costs Mortgage Limit Borrower Income Limit Program Availibility
    1% Down Payment Programs
    • 1% down payment
    • Usually combined with down payment assistance program
    • Owner-occupied, single-unit, principal residence
    • Higher rate than government-backed programs
    • Depends on program and property location
    97% LTV Ratio / 3% Down Payment Program
    • 3% down payment
    • No personal borrower contribution
    • One borrower must be first-time homebuyer
    • Credit Score: ~680
    • Debt-to-income ratio: 45% - 50%
    • Owner-occupied, single-unit, principal residence
    • Higher rate than government-backed programs
    • Private Mortgage Insurance (PMI)
    • Conforming loan limit
    • None
    Fannie Mae HomeReady Program
    • 3% down payment
    • No personal borrower contribution
    • Factors-in income from parents, resident relatives and boarders
    • Credit Score: ~620
    • Non-traditional credit profiles
    • Debt-to-income ratio: 43% - 45%, up to 50% in certain cases
    • Complete mortgage counseling class
    • Owner-occupied     1-4 units, principal residence
    • Higher rate than government-backed programs
    • Private Mortgage Insurance (PMI)
    • Conforming loan limit
    • Depends on property location
    Home Possible Program
    • 3% down payment
    • No personal borrower contribution
    • Include boarder / rental income
    • Credit score: ~660
    • Debt-to-income ratio: 43% - 45% (lender discretion)
    • Complete mortgage counseling class (first-time buyers)
    • Owner-occupied     1-4 units, principal residence
    • Lower rate for low income borrowers or if property is located in designated area
    • Private Mortgage Insurance (PMI)
    • Conforming loan limit
    • Depends on property location
    HomeOne Mortgage Program
    • 3% down payment
    • No borrower personal financial contribution required
    • Credit Score: ~660
    • Debt-to-income ratio: 43% - 45%
    • Homeowner education class required for first-time buyers
    • Owner-occupied, single-unit, primary residence
    • Higher rate than government-backed programs
    • Private Mortgage Insurance (PMI)
    • Conforming loan limit (super conforming loan limit not allowed)
    • None
    Bank of America Affordable Loan Solution Program
    • Credit Score: ~660
    • Debt-to-income ratio: 43%
    • Complete mortgage counseling class (first-time buyers)
    • Owner-occupied, single-unit, principal residence
    • Higher rate than government-backed programs
    • No private mortgage insurance (PMI) or FHA mortgage insurance premium (MIP)
    • Conforming loan limit
    Chase DreaMaker Mortgage Program
    • 3% down payment
    • No personal borrower contribution
    • Credit Score: 620
    • Debt-to-income ratio: 45%
    • Owner-occupied     1-4 units, principal residence
    • Higher rate than government-backed programs
    • Private Mortgage Insurance (PMI) -- lower than standard
    • Conforming loan limit
    • Cannot exceed area median income (AMI)
    Citi HomeRun Mortgage Program
    • 3% down payment (single unit property)
    • 1% personal borrower contribution (single family home)
    • No private mortgage insurance (PMI)
    • Credit Score: 640
    • Debt-to-income ratio: 43% - 45%
    • Requires mortgage counseling class
    • Owner-occupied, single or two-unit, principal residence
    • Market interest rate but higher rate than government-backed programs
    • No private mortgage insurance (PMI) or FHA mortgage insurance premium (MIP)
    • Conforming loan limit
    • 80% of area median income (AMI)
    Wells Fargo yourFirst Mortgage Program
    • 3% down payment
    • No personal borrower contribution
    • Considers income from non-borrower household members (relatives, boarders)
    • Owner-occupied, single-unit, principal residence
    • Higher rate than government-backed programs
    • Private Mortgage Insurance (PMI)
    • Conforming loan limit
    • None
    Your Path Mortgage Program
    • 3% down payment
    • No personal borrower contribution
    • Flexible borrower qualification guidelines
    • Considers income from non-borrower household members
    • Credit Score: 660
    • Debt-to-income ratio: 43% - 45%
    • Owner-occupied     1-4 units, principal residence
    • Lower rate for low income borrowers or if property is located in designated area
    • Private Mortgage Insurance (PMI)
    • Conforming loan limit
    • Depends on property location
    FHA Mortgage Program
    • 3.5% down payment
    • No personal borrower contribution
    • Credit Score: ~580 (3.5% down payment)
    • Credit Score (10% down payment): ~500
    • Lenders may also consider borrowers with no or non-traditional credit profiles
    • Debt-to-income ratio: 43%+ (over 50% in certain cases)
    • Owner-occupied     1-4 units, principal residence
    • Lower rate than other mortgage programs
    • Up-front and ongoing FHA Mortgage Insurance Premium (MIP)
    • None
    VA Mortgage Program
    • No down payment
    • Eligible active and retired military personnel
    • Credit Score: No minimum score required per program guidelines but most lenders  require a score of 620 
    • Minimum residual income after housing expense and debt
    • Debt-to-income ratio:~ 41%
    • Owner-occupied, single-unit, principal residence
    • Lower rate than other mortgage programs
    • Up-front VA funding fee
    • None
    USDA Guaranteed Home Loan Program
    • No down payment
    • Property must be located in a USDA designated rural area or community
    • Credit Score: ~640
    • Debt-to-income ratio: 41%
    • Owner-occupied, single-unit, principal residence
    • Located in USDA designated rural area
    • Lower rate than other mortgage programs
    • Up-front and ongoing USDA mortgage insurance premium (Guarantee Fees)
    • USDA CALC
    • None
    • Depends on property location
    • Typically 115% of area median income (AMI)
    USDA Direct Home Loan Program
    • No Down Payment
    • Property must be located in a USDA designated rural area or community
    • Mortgage payment assistance
    • 33 or 38 year mortgage terms lower monthly payment
    • Credit Score: ~640 (lower in some cases)
    • Debt-to-income ratio: 41%
    • Owner-occupied, single-unit, principal residence
    • Located in USDA designated rural area
    • Cannot exceed 1,800 square feet
    • Low as 1.0% with mortgage payment assistance
    • None
    • USDA / Conforming loan limit
    • Typically 50% -80% of area median income (AMI)
    HUD Section 184 Loan Program
    • Enables eligible Native Americans to buy a home with a 2.25% down payment (loan amounts above $50,000)
    • Flexible borrower qualification requirements
    • No minimum credit score (case-by-case borrower approval)
    • Debt-to-income ratio: 41%
    • Owner-occupied     1-4 units, principal residence
    • Lower rate than other mortgage programs
    • Low credit score does not impact rate
    • Upfront and ongoing Section 184 Program mortgage insurance fees
    • Loan limits vary by county and number of units in property
    • None
    NACA Mortgage Program
    • No down payment
    • No closing costs private mortgage insurance (PMI)
    • Lower total monthly housing expense
    • No minimum credit score (character-based borrower evaluation)
    • Complete mortgage counseling class
    • Volunteer at five housing advocacy events per year
    • Owner-occupied, single-unit, principal residence
    • Located in approved area
    • Lower rate than other mortgage programs
    • No closing costs
    • No private mortgage insurance (PMI) or FHA mortgage insurance premium (MIP)
    • Limits on property value (typically less than $425,000)
    • None
  • %
    Current Mortgage Rates as of January 23, 2019
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click here for more information on rates and product details.
  • Great Mortgage IdeaRelated FREEandCLEAR Resources

  • Sources

    Home Buyer Assistance Programs: https://www.fdic.gov/consumers/assistance/protection/mortgages/looking/homebuyer-assistance-program.html

    Low Down Payment Programs: http://www.freddiemac.com/purchasemarket/docs/dpa_lender_fact_sheet.pdf

    USDA Home Loan: https://www.rd.usda.gov/programs-services/single-family-housing-guaranteed-loan-program

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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