What Types of Mortgages Have Low Down Payment Requirements?

Couple researching online about mortgages with low down payment requirements.

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

Loan typeMinimum down paymentMinimum credit scoreMortgage insurance required?Other sample requirements
Conventional loans3%620Yes, if your down payment is less than 20%In 2022, the conforming loan limit is $647,200, or $970,800 for high-cost areas
FHA loans3.5% for borrowers with a credit score of 580 or above; 10% for borrowers with a credit score between 500 and 579500YesBorrowers pay both upfront and ongoing mortgage insurance premiums
VA loansNoneNone; depends on lenderNoBorrowers must be an eligible service member, veteran, or surviving spouse, and pay the VA funding fee
USDA loansNoneNone; 640 is preferredYesOnly low-income borrowers in eligible rural areas may apply, and they must pay an upfront guarantee fee and annual fees

Conventional Loans

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

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

These 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

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.

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