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Guide to Zero and Low Down Payment Mortgages
Guide to Zero and Low Down Payment Mortgages
October 05, 2021 / Nadav Shemer
Guide to Zero and Low Down Payment Mortgages
October 05, 2021 / Nadav Shemer

We compared the top mortgage lenders. See who ranked #1

They say a house is the biggest purchase you’ll ever make, but the truth is you don’t actually need much money to buy one. That’s all thanks to low down payment mortgages, which allow most people to qualify for a mortgage with as little as 3% down payment (and zero down payment in some cases).

In this article, we introduce the different zero and low down payment mortgage options and show which types of borrowers are eligible for each option. We also explore the main costs to you of taking a zero or low down payment mortgage (because, after all, nothing in life is truly free).

Zero and low down payment mortgage options

The standard down payment on a conventional loan is 20%. But in reality, there are many conventional and government-backed low and zero down payment mortgage options. The main ones are the “conventional 97” loan programs Fannie Mae HomeReady and Freddie Mac Home Possible and the government-backed FHA loan, VA loan, and USDA loan.

Here’s how they compare in terms of minimum down payment, minimum credit score to qualify, minimum/maximum income limit (if any), maximum debt-to-income (DTI) ratio, and mortgage insurance (MI) requirements.

Fannie Mae HomeReady

  • Min. down payment: 3%
  • Min. credit score: 620 to qualify, 680 for better interest rates.
  • Income limit: No more than 80% of area median income for property’s location.
  • Max. DTI: 50% when buyer completes counseling prior to the mortgage (max DTI on a conventional mortgage is usually 43%).
  • MI: Monthly private mortgage insurance (PMI) worth 0.5-1% of the loan amount each year. Can be cancelled by borrower request after 20% of loan has been paid, or cancels automatically after 22% of loan has been paid.

Freddie Mac Home Possible

  • Min. down payment: 3%
  • Min. credit score: 660 to qualify (qualified borrowers without credit score may be considered for mortgage with 5% down payment).
  • Income limit: Greater than 50% and less than 80% of area median income for property’s location. (Click here for Home Possible income and property eligibility tool).
  • Max. DTI: 45% (max DTI on a conventional mortgage is usually 43%).
  • MI: Monthly private mortgage insurance (PMI) worth 0.5-1% of the loan amount each year. Can be cancelled by borrower request after 20% of loan has been paid.

FHA loan

  • Min. down payment: 3.5-10%.
  • Min. credit score: 500 (with 10% down payment) or 580 (with 3.5%) down payment.
  • Income limit: Borrower must have steady income and proof of employment.
  • Max. DTI: 43%
  • MI: Upfront MI worth 1.75% of the loan plus monthly MI worth 0.45%-1.05% of the loan amount each year. Required for 11 years or lifetime of the loan, depending on the requirements of your FHA-authorized lender.

VA loan

  • Min. down payment: 0%.
  • Min. credit score: 620
  • Income limit: Borrower must have minimum level of residual income (amount of income left over each month after paying all major expenses, including mortgage payment). Residual income varies by location, loan amount, and family size.
  • Max. DTI: 41%
  • MI: None. However, there is a one-off VA funding fee that varies from 1.40% to 3.6% of the loan amount depending on the size of your down payment and whether or not you are a first-time home buyer, e.g., first-time buyer with no down payment pays 2.3% funding fee.
  • Additional eligibility requirement: Veteran who has served at least 90 consecutive days of active service in wartime or 181 days of active service in peacetime; member of the National Guard and Reserve who have served at least 6 years; or spouse of veteran who died in the line of duty or as a consequence of a service-related injury.

USDA loan

  • Min. down payment: 0%.
  • Min. credit score: 640
  • Income limit: No more than 115% of area median income.
  • Max. DTI: 41%
  • MI: None. However, there is an upfront funding fee of 1% of the loan amount.
  • Additional eligibility requirement: Home must be in qualified rural area, typically defined as a location with less than 20,000 people.

Alternative low down payment options

If you fail to qualify for a low down payment or zero down payment loan program but don’t have the money needed for a down payment, there may be other options available to you.

  • Down payment assistance. There are more than 2,000 down payment assistance programs nationwide. These include grants (money you never have to repay), forgivable and deferred-payment loans at 0% interest, matched savings programs, and tax credits from certain states and local governments.
  • Piggyback loan. Also known as an 80/10/10 loan, this is a term used by mortgage lenders when a borrower takes out a first and second mortgage at the same time. The first mortgage covers 80% of the purchase price. The second mortgage (the piggyback), covers 10% of the home price, and usually takes the form of a home equity line of credit (HELOC). The borrower makes a 10% down payment and avoids having to pay mortgage insurance (due to meeting the conventional 20% down payment requirement on the first mortgage).
  • Physician loan. Also known as a “doctor loan”, this is a mortgage for qualifying medical professionals that requires no down payment and no mortgage insurance.

Bottom line

This article shows that low down payment and zero down payment loans are available to many if not most Americans. Before taking a low down payment mortgage, consider the costs, e.g. potentially high interest rates, mortgage insurance, funding fees, and the risk of having very little equity in your home. If it suits you, then read our top lender reviews to see which lenders offer low down payment options.

Top 3 Mortgage Lenders

View Rates
  • 100% online application (in most cases)
  • Quick pre-approval and closing times
  • Flexible repayment terms (8-29 years)
  • Lack of support for self-employed borrowers
If you’re looking for an easy and comfortable loan, QuickLoans can help. Not only do QuickenLoans help ensure you get a mortgage that’s right for you to save time, but the platform ensures you are aware of your loans status 24/7 so you can keep track of what is required of you and what has already been done to avoid repeating steps that have already been completed, saving you time and confusion.
View Rates
  • Offers Fannie Mae 3% down conventional loans
  • Loan experts are on hand to assist at any time
  • Full suite of non-conventional loans
  • No weekend phone hours
  • Not licensed in NY
AmeriSave Mortgage Corporation is a direct mortgage lender operating in 49 states and DC. Since 2002, it has financed more than 400,000 homes to the tune of $105 billion in funding. It is known for its competitive rates and streamlined application, with approvals in as quickly as 25 days. It offers a wide range of loans, making it a good choice for anyone looking to purchase a home or refinance their mortgage.
View Rates
  • Digital-only mortgage platform
  • Loans customized to your needs
  • Millions of satisfied borrowers
  • Only cash-out refinance option is available
One thing makes Rocket Mortgage stand out from all other mortgage lenders: speed. Some lenders might be able to offer you better rates, others might offer great customer service, but few come close to matching Rocket for speed. This might seem like a small thing, but speed is important in the mortgage industry. Getting stuck with a time-consuming mortgage application and not even knowing whether you’ll get approved can be costly in terms of both time and energy. With Rocket, you know where you stand within a few minutes of applying and you can save time by having all your documentation verified automatically.

By Nadav Shemer
Nadav Shemer specializes in business, tech, and energy, with a background in financial journalism, hi-tech and startups. Nadav writes for He enjoys writing about the latest innovations in financial services and products.
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