Let’s say you’re eager to buy a home, but you’re intimidated by the idea of making a down payment. It’s a lot of money to save up, so you might be wondering: Do you have to put down 20%? What’s the lowest down payment you can make on a mortgage?
Here’s a breakdown of low down payment mortgage options you can explore:
Low Down Payment Home Loans
|Minimum Down Payment
|Minimum Credit Score
|Mortgage Insurance Required?
|Other Sample Requirements
|Yes, if your down payment is less than 20%
|In 2022, the conforming loan limit is $647,200, or $970,800 for high-cost areas
|3.5% for borrowers with a credit score of 580 or above; 10% for borrowers with a credit score between 500 and 579
|Borrowers pay both upfront and ongoing mortgage insurance premiums
|None; depends on lender
|Borrowers must be an eligible service member, veteran, or surviving spouse, and pay the VA funding fee
|None; 640 is preferred
|Only low-income borrowers in eligible rural areas may apply, and they must pay an upfront guarantee fee and annual fees
Buying a house with a low down payment is possible with a conventional mortgage, which is a common type of loan that isn’t insured by any government agency. There are two main categories: conforming and nonconforming loans.
“Conforming” just means that the mortgage fulfills the requirements set by Fannie Mae and Freddie Mac, two government-sponsored enterprises that guarantee the majority of mortgages in the U.S. Nonconforming loans are less standardized, and the rules vary depending on the lender.
For conforming loans, the minimum down payment is 3%. Of course, you’ll need to meet other eligibility requirements, but a large down payment generally isn’t required for conventional loans.
FHA loans are backed by the Federal Housing Administration, and meant to help make homeownership possible for people with lower credit scores and smaller down payments. An FHA mortgage could be the cheapest loan option if you qualify and fit that description.
The minimum down payment is 3.5% for people who have a credit score of at least 580. For those who have a score between 500 and 579, the minimum requirement is a 10% down payment.
VA loans are insured by the Department of Veterans Affairs, and available for eligible service members, veterans, and their surviving spouses.
There’s no minimum down payment or credit score, but lenders may set their own credit conditions. Also keep in mind that VA loans require a one-time funding fee, which helps the program continue offering loans without down payment and mortgage insurance requirements.
USDA loans are backed by the Department of Agriculture, and offered to low-income borrowers in eligible rural areas. While USDA loans don’t have a minimum down payment requirement, there are other costs to consider for eligible applicants. You’ll have to pay an upfront guarantee fee, as well as an annual fee that functions like mortgage insurance.