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There are a wide range of no and low down payment mortgage programs available to borrowers. While many of these programs are also available to repeat home buyers they are especially applicable to first-time home buyers who may struggle to save funds for a down payment. The programs below enable you to purchase a home with a down payment that ranges from zero to 3.5% of the property purchase price. The ability to qualify for a mortgage with that low of a down payment makes buying a home more affordable and accessible to more people.
Conventional Low Down Payment Mortgage Programs
As illustrated by the list below, borrowers have multiple low down payment mortgage options including both conventional and government-backed programs. Conventional programs include HomeReady, HomeOne and Home Possible in addition to proprietary programs offered by banks such as Bank of America, Chase, Citi and Wells Fargo. Conventional simply means the programs are not insured by the government. In general, conventional low down payment programs only require you to put down 3% of the property purchase price.
While conventional loan programs share a lot of similarities some target specific borrower niches. For example, the HomeReady Program offers more flexible qualification requirements for multi-generational borrowers and applicants with non-traditional credit profiles. The HomeOne Program does not apply income limits which makes it attractive to a wider borrower demographic. You should review our in-depth information to find the best low down payment mortgage program for you.
Government Backed Low Down Payment Mortgage Programs
In addition to conventional options, there are several government-backed low down payment mortgage programs including the FHA, VA, USDA and HUD Section 184 programs. These programs are insured or backed by the government which enables them to offer either more flexible borrower qualification requirements or lower mortgage rates. The FHA loans require a down payment of 3.5%, the HUD Section 184 program requires a down payment of 2.25% and the VA and USDA programs require no down payment at all.
Similar to conventional programs, government-backed low down payment programs target specific borrower categories. While the FHA program is available to all borrowers, the USDA program only applies to properties located in designated rural areas, the VA Program is only available to eligible active duty and retired military personnel and Section 184 loans are only available to eligible Native American applicants. Borrowers should be sure to explore government-backed low down payment options to determine the program that is right for them.
Use the FREEandCLEAR Lender Directory to search for twenty-five mortgage programs including many of the no or low down payment programs listed in the table below.
There are also low down payment mortgage programs if you are looking to buy a fixer upper or make significant renovations to a property. These programs can be very helpful for borrowers who live in more expensive areas who may not be able to afford a move-in ready home. The Fannie Mae HomeStyle Renovation and FHA 203(k) programs enable you to include both the cost of buying a home and property renovations in one, low down payment mortgage. These programs also use the post-renovation property value to determine what size mortgage you qualify for which enables you to obtain a larger loan as compared to standard programs. Review the low down payment fixer upper mortgage programs below to understand your options.
Combining a Low Down Payment Program with a Home Buyer Assistance Program
It is also important to highlight that low down payment programs can be combined with other home buyer assistance programs to help provide an additional financial boost. Down payment assistance programs and closing cost grants can help you pay for all or part of your down payment or closing costs when you buy a home. In some cases, these programs enable you to buy a home with no personal financial contribution even when a down payment is required. For example, you could use a down payment assistance grant to pay for the 3.0% down payment required for a HomeReady mortgage or other program. Combining multiple programs enables you to make the required down payment and buy a home without using your personal funds or depleting your savings.
Additionally, borrowers often overlook closing costs, which can run thousands of dollars, so a closing cost grant can be very beneficial when funds are tight. Combining multiple low down payment and home buyer assistance programs makes owning a home much more attainable for borrowers with low-to-moderate incomes or limited financial resources.
The table below summarizes summarizes over 20 low down payment and home buyer assistance programs. The extensive program offering is designed to meet the diverse needs of mortgage borrowers with different financial priorities and goals. Review the summary information provided below and then click on the program title to learn much more about each program.
The conventional 97% LTV mortgage program that allows first-time home buyers to buy a new home with a down payment of 3.0% of the property purchase price
Also known as the 97% LTV mortgage program, the program is similar to the HomeReady Program but has a stricter borrower credit score requirement, does not have a borrower income limit and does not require pre-purchase home buyer counseling
The 97% LTV program is offered by Fannie Mae approved lenders such as banks and mortgage brokers
The HomeReady Mortgage Program enables home buyers with limited resources and alternative sources of income afford mortgages
The program enables you to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower contribution
The program allows lenders to include or consider income from non-occupant borrowers (parents), non-borrower household members (relatives) and boarders, improving your ability to qualify for a mortgage
Compared to other programs, the HomeReady program has more flexible qualification requirements especially as it relates to a borrower's credit profile. Borrowers with lower credit scores or limited or no credit histories may be eligible for the program
The HomeReady Mortgage Program is offered by Fannie Mae approved lenders such as banks, mortgage brokers and mortgage banks
Offered through a collaboration between Freddie Mac, Alterra Home Loans and New American Funding, the Your Path Mortgage Program enables borrowers to buy a home with a down payment as low as 3.0% and no minimum borrower contribution
Features flexible borrower qualification requirements including using income from non-borrower household members for mortgage qualification as well as enhanced flexibility for self-employed borrowers and borrowers with seasonal or second jobs
The Your Path Program addresses the growth in multi-generational households as well as the increase in borrowers with non-traditional sources of income
The Federal Housing Administration (FHA) offers government-backed mortgage programs designed to help low-income individuals and individuals with limited funds buy a home by enabling them to purchase a property with a down payment of only 3.5%
Although you do not have to be a first-time home buyer to qualify for the FHA Mortgage Program, the program works very well for first-time home buyers
The FHA Mortgage Program is offered by approved lenders including banks, mortgage brokers, mortgage banks and credit unions
The U.S. Department of Veterans Affairs (VA) offers mortgage programs for active and retired military personnel, including individuals in the reserves and national guard, that enable them to purchase a property with no down payment and at favorable interest rates
The VA Home Loan Program is available to eligible borrowers through approved lenders including banks, mortgage brokers, mortgage banks and credit unions
The USDA Home Loan Program is designed to help individuals with low-to-moderate incomes obtain mortgages and buy homes located in rural areas or small communities with no down payment
The program allows qualified borrowers to obtain USDA-backed mortgages at favorable interest rates to finance 100% of the purchase price (plus certain fees and expenses) of eligible properties located in USDA-designated rural areas
The USDA Home Loan Program is offered by approved lenders including banks, mortgage brokers, mortgage banks and credit unions
NACA, the Neighborhood Assistance Corporation of America, offers a home purchase mortgage program designed to make home ownership more attainable for more people, especially people with limited funds and challenging credit profiles
The NACA home loan program enables eligible borrowers to purchase a home with no down payment and no closing costs using a fixed rate mortgage with an at or below market interest rate
The NACA program is available to borrowers of all income levels but there are limits on the location and value of properties eligible for the program
The FHA 203(k) Loan Program enables home owners to finance both the purchase of a home as well as the cost of significant rehabilitation, remodeling and repairs to the home with one FHA mortgage
The FHA 203(k) Loan Program allows borrowers buying a home to finance the cost of significant home remodeling or rehabilitation without having to obtain a separate construction loan which can be costly, complicated and time-consuming to arrange
Instead, the FHA 203(k) Loan Program enables borrowers to finance the purchase of a home and pay for a significant (greater than $5,000) home improvement project with a single FHA mortgage
Although you do not have to be a first-time home buyer to qualify for the FHA 203(k) Program, the program works well for first-time home buyers looking to buy a "fixer-upper"
The FHA 203(k) program is offered by approved lenders including banks, mortgage brokers, mortgage banks and credit unions
The Fannie Mae HomeStyle Renovation Mortgage program is similar to the FHA 203(k) program and enables borrowers to purchase a home that needs renovations or refinance the mortgage on their existing home and include funds for renovating the property in the loan amount
Unlike the FHA 203(k) program, the Fannie Mae HomeStyle Renovation Mortgage program does not charge a one-time and ongoing FHA mortgage insurance premium, which are extra costs for the borrower
Additionally, the Fannie Mae HomeStyle Renovation Mortgage program applies to both owner-occupied and investment properties as compared to the FHA 203(k) program that only applies to owner-occupied properties
The HomeStyle Renovation Program is offered by Fannie Mae approved lenders including banks, mortgage brokers and mortgage banks
An Individual Development Account, or IDA, is a special savings account to help people with low incomes save money for a specific purchase such as buying a house, paying for school or starting a small business
Individual Development Accounts are usually offered through local non-profit organizations
With a contract for deed the property seller provides a seller loan for the buyer to purchase the property according to terms outlined in a contract. The buyer is usually not required to make a down payment
The buyer takes possession of the property when the purchase transaction closes but does not legally own the property until the terms of the contract are fulfilled which usually happens when the seller loan is repaid in full. The buyer is responsible for paying property taxes, insurance and for any property repairs even though he or she does not legally own the property
Contract for deed transactions expose borrowers to significant risks they should fully understand before using one to buy a home
Home Possible: http://www.freddiemac.com/homepossible/
About the author
Michael Jensen, Mortgage and Finance Guru
Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael