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Low- and No-Down Payment Mortgage Loans For 2019
There are two ways to buy a home without a big down payment. Use one of the many low- or no-down payment mortgage loan programs; or, use one of hundreds of Down Payment Assistance (DPA) programs available to buyers.
This page updated and accurate as of 04/04/2019.
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What’s in this article?
If You Want, You Can Buy A Home With No Money Down
You don’t need a large down payment to purchase a home.
You can purchase a home with little or no money down, at competitive mortgage rates, and with a monthly payment you can afford.
Buying a home with little or no money down brings two big advantages.
The first advantage is that you leave your emergency fund as full as it can be.
Having an emergency fund is critical because life rarely moves in straight lines. You could become unexpectedly ill, or need emergency dental work. These are costly events.
Having cash in the bank is good for when life moves sideways.
The second advantage to buying a home with little or no money down is that you can buy a home more quickly. You don’t have to wait. There’s no need to save for a down payment. You can stop renting and start owning more quickly.
You can buy next month instead of next year.
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And, once you commit to buying a home with little or no money down, there are lots of ways to do it.
The most common way to buy a home with little or no money down is to use a low- and no-down payment mortgage loan. This includes 100% mortgages, loans for U.S. veterans, and loans requiring three percent down.
Down Payment Assistance programs are available in every state, to most first-time buyers, and give grant money to people who want to buy homes.
Getting approved for Down Payment Assistance is easy, too — all you have to do is ask.
List: Low- And No Money Down Mortgages
You don’t need to put down a lot of money when you want to buy a home. Low- and no-down payment home loans are readily available today.
Buyers can choose from loans allowing five percent, three-and-a-half percent, and three percent down. Loans requiring nothing down are available to buyers, too.
These loans aren’t a secret.
Low- and no-down payment loans are always advertised. The best way to get them is to ask for them by name.
The FHA Mortgage
The FHA mortgage is backed by the Federal Housing Administration (FHA). Most mortgage lenders offer the FHA loan. Nothing special is required to apply.
So, why do home buyers like FHA mortgages?
- FHA mortgages allow a down payment of 3.5 percent
- There is no minimum credit score requirement
- Mortgage rates are often below the market mortgage rate
Another FHA mortgage feature is that FHA loans are assumable . This means that your home’s FHA loan — along with its mortgage rate — can be assumed by a future buyer of your home.
Additionally, homeowners with FHA-backed loans get access to the FHA Streamline Refinance, which is one of the simplest ways to lower your future mortgage interest rate.
FHA loans are an overwhelming favorite for first-time home buyers.
The HomeReady Mortgage®
The HomeReady Mortgage® is a conventional loan, backed by Fannie Mae.
It’s a low-down payment loan requiring just three percent down and it’s available to first-time home buyers in addition to repeat buyers of homes.
The HomeReady loan is a relatively new low-down payment mortgage. It was designed to help buyers with low- and moderate-income to buy homes, but the program can be used by any person, with any income.
Additionally, because HomeReady mortgages are subsidized by the government, borrowers using the program get access to lower mortgage rates as compared to other buyers of homes.
Buyers matching any of the following items can use HomeReady:
- Your household income is 80% or less than the area’s median income
- Your home’s census tract’s median income is 80% or less than the area’s median income
- The minority density of your census tract is 30% or higher; with income that’s below than the area’s median income
Skip the math. Use this HomeReady eligibility map to check your eligibility.
Also, approval standards are reduced for HomeReady Mortgage applicants, which makes it easier to get approved. Lenders show leniency for below-average credit scores; and, for buyers who earn boarder incomes and other non-traditional income types.
Co-signers are allowed with HomeReady home loans.
The Home Possible Mortgage®
The Home Possible Mortgage® is a conventional loan, backed by Freddie Mac.
Like the HomeReady program, Home Possible is a low-down payment loan requiring three percent down, and it, too, was built to help low- to moderate-income home buyers.
And, also like HomeReady, anyone can use the program, regardless of their income.
Buyers meeting any of the following criteria can be Home Possible-eligible:
- Household income is below the area’s median income
- Home’s census tract’s median income is 80% or less than the area’s median income
- Home’s census tract’s minority density is 30% or higher; and median income is below the area’s median income
Use this Home Possible eligibility map to check your eligibility.
Co-signers are allowed with Home possible and approval standards are reduced. Mortgage applicants can have below-average credit scores, and can earn boarder incomes and other non-traditional income.
HomeReady & Home Possible Eligibility Map
Your household income of $ 65,000 qualifies you for programs in the shaded areas. Select a region for details.
Your household income of $ 65,000 qualifies you programs in the shaded regions:
- HomeReady® loan
- Home Possible® loan
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The Conventional 97 Mortgage
The Conventional 97 mortgage program is another low-down payment program, allowing buyers to make a down payment of just 3 percent on a home.
Unlike the FHA program, the Conventional 97 mortgage enforces a minimum credit score on buyers, which helps keep its interest rates low.
The following home buyers are best suited to Conventional 97:
- Better-than-average credit scores
- Purchasing a 1-unit home or a condominium
- Prefer a fixed-rate mortgage over an adjustable-rate one
The Conventional 97 loan requires that buyers pay private mortgage insurance (PMI) until their equity in the home reaches 20% of the home’s value.
Get Pre-Approved For 3% Down
The VA Mortgage
The VA mortgage is a no-money-down mortgage backed by the Department of Veterans Affairs (VA).
VA loans are available to active members of the U.S. military, U.S. military veterans, surviving spouses , and members of the National Guard and Reserves.
There is no down payment requirement for the VA mortgage. It’s a true 100% loan.
VA loans offer home buyers other benefits, too:
- VA loans never require mortgage insurance
- Mortgage rates are cheapest as compared to other mortgage rates
- Loan approvals are more “relaxed” as compared to other loan types
Veterans of the U.S. military and active duty personnel should consider the VA home loan before all other loan types.
As compared to other loans, VA loans are almost always the cheapest, fastest, and best mortgage loan around.
The USDA Mortgage
The USDA mortgage is a 100% home loan backed by the U.S. Department of Agriculture (USDA).
The program is available to buyers in rural and less-dense suburban neighborhoods nationwide and there is no down payment requirement.
Why choose the 100% USDA mortgage?
- Mortgage rates consistently beat average market rates
- Mortgage insurance rates are cheaper than for other loan types
- USDA home loans allow “energy-efficiency” subsidies as part of the loan
USDA mortgages are available to buyers in areas categorized as low-density. You can’t use USDA loans to buy homes in a downtown area or in a big city. However, these areas account for just a small percentage of the county’s footprint.
90% of the United States is eligible to use the zero money down USDA loan.
Use A Downpayment Assistance Program (DPA)
Downpayment assistance (DPA) programs are another way for buyers to purchase homes with little or no money down.
Down Payment Assistance programs are available in all 50 states, and through most counties and cities, too.
There are hundreds of downpayment assistance programs nationwide. Each falls into roughly one of five groups, and some make zero money down home loans possible for buyers, regardless of credit score.
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Down Payment Assistance Type 1: The Interest Rate Reduction
Interest rate reductions are discounts on your mortgage loan’s interest rate.
Interest rate reductions are made possible using discount points . As part of your Down Payment Assistance, money is paid from the program to your lender, which uses the money to lower your interest rate.
If today’s mortgage rate is 4.00%, after an interest rate reduction, your rate may be 3.75%.
Down Payment Assistance Type 2: The Down Payment Grant
A down payment grant is money given to a home buyer to use as a down payment for a home.
Down payment grants don’t require pay backs so long as you meet the rules, which usually includes a statement that you’ll live in your home for 5 years, at least. If you leave before five years have passed, the money from the grant must be repaid.
Down payment grants can be for $10,000 or more.
Down Payment Assistance Type 3: The Tax Payment Reduction
Tax payment reductions are a variation on the Down Payment Assistance program theme.
With a tax payment reduction, you don’t get money to help with your purchase directly. Instead, you get bonus, long-term tax benefits as the owner of a home. Tax payment reductions lower your annual tax bill to the government, which keeps more money in your savings.
Tax payment reductions are usually available at the federal levels, but state and city tax reductions are sometimes offered, too.
Down Payment Assistance Type 4: The Closing Cost Reimbursement
Another form of down payment assistance is the closing cost reimbursement package. Closing cost reimbursement is a grant of cash, paid at closing.
You don’t have to repay a closing cost reimbursement.
When you take a closing cost reimbursement as downpayment assistance, some cities will require you to live in your home for 3 years or longer. If you move before the three years end, you’ll be asked to repay the down payment assistance monies paid.
Closing cost reimbursements are meant to reduce the cost of buying a home.
Down Payment Assistance Type 4: The Down Payment Loan
Down payment loans are another form of down payment assistance. They don’t typically require a payback.
Downpayment loans are unique. Many are structured like this:
- A 0% interest rate, which means no interest
- Waived after 5 years of living in the house, no payback required
- Payments only due if you move within the first 5 years
Downpayment loans are due on sale . As long as you live in your home, no payments are due. Then, after some number of years, the loan gets waived off.
Not all downpayment loans work like this, but many do.
Can I Buy A Home With Zero Down?
No down payment? No problem. There are multiple ways for today’s home buyers to buy a home with little or no money down.
Choose from a number of low- and no-down payment mortgages, then boost your home purchasing dollar through the use of Down Payment Assistance programs available in your area.
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Written by Dan Green
Dan Green is a mortgage lending expert and the founder of Growella. Prior to Growella, Dan was a six-time, top-producing loan officer; and, ranked repeatedly among the top 1% of loan officers nationwide. Dan’s home buying expertise has been in print and on TV with The Wall Street Journal, NPR, Forbes, CNBC, and others.