July 3, 2022

Low-Down-Payment Mortgages | U.S. News

Saving a 20% down payment to get a mortgage is daunting — and it’s a myth that you need this much cash to buy a home. A range of low-down-payment mortgages and down payment assistance programs can unlock homeownership for people who lack substantial savings but can afford monthly house payments.

Here’s how you can buy a home with a low down payment that fits your needs. What you’ll learn here:

  • What is a low-down-payment mortgage?
  • What are the pros and cons of a low-down-payment mortgage?
  • How do you qualify for a low-down-payment mortgage?
  • What low-down-payment mortgage options are available?

What Are the Best Low-Down-Payment Mortgage Lenders of 2021?

PNC Bank

3% Min. Down Payment
Not disclosed Min. Credit Score

Chase

3% Min. Down Payment
620 Min. Credit Score

Lender

Learn More
3% Min. Down Payment
Not disclosed Min. Credit Score

Lender

Learn More
3% Min. Down Payment
620 Min. Credit Score

Best for bad credit

Carrington Mortgage Services makes a range of mortgages, including refinancing, available to borrowers nationwide. The company, which provides conventional and government-backed mortgages, has funded $22 billion in home loans since 2011.

Before You Apply

  • Mortgage types: conventional, FHA, VA, USDA, ARM, Carrington Flexible Advantage, first-time buyers, refinancing
  • Minimum FICO credit score: 500
  • Maximum loan amount: $2.5 million
  • Better Business Bureau rating: A+

Best Features

  • Applicants with credit scores as low as 500 are accepted for some products.

  • Conventional loans are offered with down payments as low as 3%.

See full profile

Best for product availability

Fairway Independent Mortgage Corp. is based in Madison, Wisconsin, and has funded billions of dollars in loans since the company began in 1996 – and more than $58 billion in 2020 alone. The lender offers several mortgage products, including conventional, Federal Housing Administration, U.S. Department of Agriculture, U.S. Department of Veterans Affairs and refinancing loans. Fairway Independent Mortgage also provides jumbo loans for home purchases in high-cost markets, renovation loans, adjustable-rate mortgages and reverse mortgages. Fairway is an independent mortgage company and serves as a mortgage broker and direct lender.

Before You Apply

  • Mortgage types: fixed rate, ARM, conventional, USDA/Rural Development, FHA, VA, jumbo, refinance, renovation, reverse mortgage
  • Minimum FICO credit score: 580
  • Maximum loan amount: undisclosed
  • Better Business Bureau rating: A+

Best Features

  • The selection of mortgages includes VA and USDA loans, which often have no down payment requirements.

  • The company has an A+ customer service rating with the Better Business Bureau.

  • Renovation loan options include the HomeStyle Renovation Loan, which combines the cost of remodeling and the mortgage into one loan.

See full profile

Best for consumers with credit scores between poor and good

NBKC Bank is a Kansas-based mortgage lender. It originates home loans in all 50 states.

Before You Apply

  • Mortgage types: conventional, fixed rate, ARM, FHA, refinance, VA, FHA Streamline Refinance, Refi Plus, VA Streamline Refinance
  • Minimum FICO credit score: 620
  • Maximum loan amount: Not disclosed
  • Better Business Bureau rating: A+

Best Features

  • Borrowers with fair credit may qualify.

  • It features a simple online application process.

  • VA loan borrowers aren’t charged lender fees.

See full profile

Best for product selection

Guild Mortgage, founded in 1960, specializes in home loans and serves borrowers nationwide. The lender’s full suite of products includes conventional and government-backed mortgages and home renovation loans.

Before You Apply

  • Mortgage types: conventional, FHA, VA, USDA, ARM, refinancing, renovation, jumbo
  • Minimum FICO credit score: 620
  • Maximum loan amount: $2 million
  • Better Business Bureau rating: A+

Best Features

  • A broad range of mortgage products are offered.

  • Special mortgage programs for first-time buyers and manufactured homebuyers are available.

See full profile

Best for VA loans

Veterans United Home Loans provides mortgages to veterans and military families in all 50 states and Washington, D.C., and specializes in VA loans.

Before You Apply

  • Mortgage types: VA, VA jumbo, refinance
  • Minimum FICO credit score: 640
  • Maximum loan amount: $1.5 million
  • Better Business Bureau rating: A+

Best Features

  • No down payment or PMI are required.

See full profile

Best online bank for customer service

Ally Bank is a Detroit-based online bank. Ally offers traditional banking products and services, such as conventional mortgages, as well as refinance loans and jumbo home loans.

Before You Apply

  • Mortgage types: fixed rate, ARM, home equity loans, refinancing, HomeReady for first-time homebuyers
  • Minimum FICO credit score: 620
  • Maximum loan amount: $4 million
  • Better Business Bureau rating: A+

Best Features

  • A program is available for first-time homebuyers.

  • Existing Ally customers can get a closing cost discount.

See full profile

Best for large loan amounts

Bank of America serves roughly 66 million customers in all 50 states. The lender offers conventional, Federal Housing Administration, Department of Veterans Affairs and jumbo loans, as well as home equity lines of credit and mortgage refinancing.

Before You Apply

  • Mortgage types: fixed rate, Affordable Loan Solution, FHA, VA, ARM, home equity line of credit, fixed-rate refinancing, FHA refinancing, VA refinancing, cash-out refinancing, adjustable-rate refinancing, jumbo
  • Minimum FICO credit score: Not disclosed
  • Maximum loan amount: $2.5 million
  • Better Business Bureau rating: A+

Best Features

  • Bank of America has a wide variety of mortgage products.

  • The lender offers origination fee discounts for qualifying Bank of America and Merrill Lynch clients.

  • Home equity lines of credit have no annual, application or cash advance fees or closing costs.

  • Bank of America offers a first-time homebuyer program.

See full profile

Best for low down payment

PNC Bank is one of the largest U.S. banks, serving more than 8 million customers in all 50 states. PNC offers most types of mortgages.

Before You Apply

  • Mortgage types: fixed rate, FHA, VA, USDA, ARM, home equity line of credit, refinancing, medical professional mortgage program, jumbo, PNC Community
  • Minimum FICO credit score: Not disclosed
  • Maximum loan amount: $5 million
  • Better Business Bureau rating: A+

Best Features

  • Multiple types of mortgages are available.

  • Some mortgage options require no or low down payments.

  • PNC supplies an online home ownership cost tool.

See full profile

Best for no down payment

Alliant Credit Union is a nonprofit financial cooperative. The credit union serves customers in all 50 states. Mortgage products include conventional, jumbo and refinancing loans, and home equity lines of credit.

Before You Apply

  • Mortgage types: Traditional, ARM, refinancing, home equity line of credit, Alliant Advantage Mortgage
  • Minimum FICO credit score: 620
  • Maximum loan amount: $2.5 million
  • Better Business Bureau rating: A+

Best Features

  • No-down-payment mortgages are available for first-time homebuyers with excellent credit.

  • Mortgages are available to borrowers with FICO credit scores as low as 620.

See full profile

What Is a Low-Down-Payment Mortgage?

A low-down-payment mortgage is one that requires a down payment – the portion of your home’s purchase price you pay upfront – of less than 20%.

“Many borrowers with limited resources find these mortgages attractive because it allows them to save their remaining assets for incidentals and other unexpected expenses,” says Julienne Joseph, assistant director of government housing programs, Mortgage Bankers Association.

Down payment requirements for conventional loans typically range from 3% to 5%, sometimes up to 15%, depending on your bank and your credit. Government loan programs can go as low as 0% and up to 3.5%, although you may need to meet credit and income criteria and live in certain areas.

“We have to get over the fallacy that people need 20% down to buy a home,” says Bill Banfield, executive vice president of capital markets, Quicken Loans.

What Are the Pros and Cons of Low-Down-Payment Mortgage?

Is a low-down-payment mortgage right for you? You might decide to apply for a loan with a down payment of less than 20% for many reasons.

Consider these pros and cons:

Pros

  • You will bring less cash to closing.
  • You can access homeownership affordably.
  • You can keep more savings for emergencies.

With a low down payment, you can get into a home faster than waiting to save for a large down payment. Speed could help you take advantage of historically low interest rates .

“(A low down payment) provides the ability for people to buy a home and begin establishing wealth by owning an asset and paying down that debt,” Banfield says.

First-time homebuyers often choose low-down-payment mortgages because they do not have equity in a home to put toward a purchase. Also, you can preserve some of your savings for other costs or simply maintain a cash reserve for emergencies.

But there are drawbacks: Putting less money down means your monthly mortgage payments will be higher, and you will likely pay private mortgage insurance on top of that.

Cons

  • You will likely make higher monthly payments.
  • You will have little to no equity in the home.
  • You will pay higher interest rates.

“Keep in mind, when you get into a home for a low down payment, you’ll have little to no equity, so there are no funds to tap into for a cash-out refinance or home equity line of credit,” says Stephanie Hawley, senior loan officer at Flagstar Bank.

These options are generally available once a homeowner has 15% to 20% equity. “Be prepared that it might take you five to seven years before you can tap into those options,” Hawley says.

Also, buyers need to plan for expenses other than the down payment, including closing costs, inspections and an appraisal. “Someone with only 3% to put down might need to look at 0% down or down payment assistance because they’ll need to use that savings elsewhere to close on the home,” Hawley says.

How Do You Qualify for a Low-Down-Payment Mortgage?

The most important factor to qualify for any mortgage, including one with a low down payment, is a solid credit report.

“Take a look at your credit report before meeting with lenders, and be sure you are paying bills on time,” Banfield says. “If you can pay down balances, do that. And definitely do not open up new accounts, especially when you are in the homebuying process.”

Your FICO score can determine the cost of your mortgage and drive mortgage insurance prices up or down. For example, conventional low-down-payment mortgages are generally for borrowers with a 620 credit score or higher, says David Battany, executive vice president of capital markets, Guild Mortgage.

The Federal Housing Administration’s 3.5% down mortgage is available to buyers with a 580 credit score. If your credit score is below 580, you’ll probably need to put down 10% to get a mortgage, Banfield says.

However, some banks offer local programs for low- to moderate-income buyers who might be eligible for funds to assist with a down payment, closing costs or both expenses.

Be sure any money you will use toward a down payment and closing costs is in one bank account, especially if you plan to pull funds from investments, savings or other sources, such as gift money. “Have all of that in one account so it can be documented and is easy for someone who is not you to understand where the money will come from,” Banfield says.

What Low-Down-Payment Mortgage Programs Are Available?

If you’re having a tough time saving for a down payment and 20% down seems out of reach, you’re not alone — and there’s good news. You could qualify for several low-down-payment mortgage programs, depending on credit history, household income and neighborhood.

FHA Loan
The Federal Housing Administration offers a low-down-payment mortgage that allows you to put as little as 3.5% down. Borrowers can qualify with credit score requirements that are more lenient than conventional low-down-payment loans.

Your FICO score must be at least 580 to make a 3.5% down payment. For scores between 500 and 579, you’ll need a 10% down payment.

Your debt-to-income ratio – how much you owe each month compared with how much you earn – should be less than 43%, and you must provide proof of employment and steady income. However, keep in mind that these are the FHA’s standards, and lenders may impose more strict requirements.

U.S. Department of Agriculture Loan
The USDA’s Single Family Housing Guaranteed Loan Program is available for certain rural areas. Borrowers do not have to meet credit score requirements but must show an ability to manage debt and pay bills. No down payment is required, but you’ll pay an upfront guarantee fee and an annual fee.

VA Loan
The Department of Veterans Affairs, or VA, offers a zero-down-payment mortgage for qualifying veterans and spouses. A funding fee is charged at closing, which can be financed, Banfield says. Veterans who want to apply must furnish a Certificate of Eligibility, or COE.

HomeReady by Fannie Mae
Fannie Mae offers a 3% down payment loan for low- to middle-income homebuyers. Your credit score must be at least 620 to get a HomeReady loan, and if it is 680 or higher, you could get better pricing. Credit guidelines are tougher for this loan compared with the FHA loan.

Conventional 97
This Fannie Mae loan requires a 3% down payment but sets no income limits, as with the HomeReady loan. Buyers need a credit score of 620 or higher for this conventional loan.

Freddie Mac Home Possible Mortgage
This fixed-rate loan has a down payment as low as 3% and lower-cost mortgage insurance than FHA loans. The Freddie Mac Home Possible loan is available for those with credit scores of 620 or higher.

Fannie Mae HomePath Ready Buyer Loans
Fannie Mae offers a program for first-time homebuyers who want to purchase an REO property – a home owned by a lender or mortgage investor. You can put as little as 3% down and get up to 3% of the purchase price back as closing cost assistance for HomePath properties.

Low-Down-Payment Bank Loans
Lenders may offer their own low-down-payment mortgages and down payment assistance programs that help homebuyers get into a loan without a 20% down payment.

“Talk to a local lender who is a licensed professional and can share knowledge about the offerings in your area,” says Ann Thompson, retail sales executive-West, consumer lending, Bank of America. “Meet with lending specialists at more than one bank, and ask about programs because they vary.”

Some employers offer down payment assistance, Thompson says. State, county and municipal grant and loan programs may also be available to help you afford a mortgage down payment.

View More Best Low-Down-Payment Mortgage Lenders

Best for online service

Caliber Home Loans of Coppell, Texas, offers mortgage and home equity products nationwide. Options include conventional, adjustable-rate, refinancing, Federal Housing Administration, U.S. Department of Agriculture and Veterans Affairs loans. Caliber has been in business since 2008, and is focused on home lending products.

Before You Apply

  • Mortgage types: conventional, FHA, VA, USDA, ARM, refinancing, bond, renovation, Freddie Mac HomeOne, Freddie Mac Home Possible, Fannie Mae HomeReady
  • Minimum FICO credit score: 620
  • Maximum loan amount: $3 million
  • Better Business Bureau rating: A

Best Features

  • The first-time homebuyer program HomeOne can require a down payment of as little as 3% and borrowers may qualify with a minimum 620 credit score.

  • Government-insured loans including Federal Housing Administration, Veterans Affairs, and United States Department of Agriculture programs are available.

See full profile

Best for product range

CMG Financial is a privately held mortgage banking firm operating nationwide with localized support, founded in 1993 and based in San Ramon, California. The lender offers a range of products including conventional, government and specialty mortgages, like jumbo loans.

Before You Apply

  • Mortgage types: conventional, FHA, VA, USDA, jumbo, All in One Loan, 203K Renovation Loan, Fannie Mae HomeReady, Freddie Mac Home Possible, HomeFundIt, refinance
  • Minimum FICO credit score: 620
  • Maximum loan amount: $3 million
  • Better Business Bureau rating: A+

Best Features

  • Exclusive mortgage products include the HomeFundIt for crowdfunding a down payment.

  • The lender has a national presence with regional fulfillment and local support.

  • CMG Financial offers a mobile app.

See full profile

Best for low costs

Chase, one of the nation’s largest banks, offers mortgages, refinance loans and home equity loans for qualified borrowers.

Before You Apply

  • Mortgage types offered: conventional, ARM, conforming, FHA, DreaMaker, VA, jumbo, refinancing
  • Minimum FICO credit score: 620
  • Maximum loan amount: $3 million
  • Better Business Bureau rating: A+

Best Features

  • Down payments as low as 3% are accepted.

  • Fixed- and adjustable-rate mortgages are available.

See full profile

Best for fair credit

Flagstar offers banking and lending products in every state. Borrowers can select from conventional or government-backed mortgages, such as FHA, VA and U.S. Department of Agriculture loans, and opt for adjustable-rate mortgages. Other choices include home equity loans and lines of credit.

Before You Apply

  • Mortgage types: conventional, VA, ARM, FHA, USDA, jumbo, refinance, home equity
  • Minimum FICO credit score: Not disclosed
  • Maximum loan amount: $3 million
  • Better Business Bureau rating: A+

Best Features

  • Flagstar Bank provides a broad selection of mortgages and home equity loans.

  • Some mortgages require no or a low down payment.

  • Borrowers can apply for loans online.

See full profile

Best for digital customer care

PrimeLending is a Dallas-based mortgage lender with several mortgage loan options, including conventional loans, jumbo loans, government-backed loans and refinance loans. The lender is a subsidiary of PlainsCapital Bank.

Before You Apply

  • Mortgage types: fixed rate, ARM, conventional, cash-out refinance, refinance, jumbo, FHA, VA, USDA, new construction, interest rate reduction refinance loan
  • Minimum FICO credit score: 640
  • Maximum loan amount: undisclosed
  • Better Business Bureau rating: A+

Best Features

  • Homebuyers can choose from a variety of mortgage products.

  • Home loans are available nationwide.

  • Down payment and closing cost assistance is available.

See full profile

Best for conventional mortgage

Citizens Bank is a regional bank based in Providence, Rhode Island. It offers traditional banking services and products, including home loans and mortgage refinance loans.

Before You Apply

  • Mortgage types: conventional, ARM, refinance, HELOC, jumbo, fixed rate
  • Minimum FICO credit score: undisclosed
  • Maximum loan amount: undisclosed
  • Better Business Bureau rating: A+

Best Features

  • Citizens Bank provides a homebuying service with rewards for borrowers in select states.

  • Homebuyers can get an interest rate discount for qualifying automatic payments.

  • Borrowers can apply online.

See full profile

Best for government loans

Founded in 2008, PennyMac is a national mortgage lender with more than $402 billion in loans serviced. PennyMac offers a range of home loans, including conventional, Federal Housing Administration, Veterans Affairs and investment property mortgages.

Before You Apply

  • Mortgage types: conventional, FHA, VA, ARM, refinancing
  • Minimum FICO credit score: 620
  • Maximum loan amount: $765,600
  • Better Business Bureau rating: A+

Best Features

  • PennyMac accepts a 50% debt-to-income ratio for conventional loans in some instances.

  • Online capabilities include a 24/7 access center and email status updates.

See full profile

Best for low APR

New American Funding is a national mortgage lender with a variety of home loan options. The lender has processed more than $27 billion in mortgages.

Before You Apply

  • Mortgage types: ARM, cash-out refinance, conventional, FHA, HELOCs, jumbo, reverse, USDA and VA
  • Minimum FICO credit score: 620
  • Maximum loan amount: $3 million
  • Better Business Bureau rating: A+

Best Features

  • Provides multiple mortgage options, including low and no down-payment loans

  • Offers fixed- or adjustable-rate mortgages

See full profile

Best for product availability

Freedom Mortgage Corp. serves more than 1 million customers in all 50 states, plus the District of Columbia, the U.S. Virgin Islands and Puerto Rico. The lender offers various mortgage products, including conventional, adjustable-rate, jumbo, refinance, Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture loans.

Highlights
Mortgage types offered: Conventional, FHA, VA, USDA, Refinancing (conventional), Refinancing (FHA), Refinancing (VA), Refinancing (USDA)
• Minimum FICO score: 620 (conventional), No minimum (VA), 540 (FHA), No minimum (USDA)
• Max DTI: Not disclosed
• J.D. Power satisfaction rating: Two out of five

Best Features

  • Wide selection of mortgage loans.

  • Prequalification is available.

  • Borrowers with fair credit may qualify.

See full profile

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