The best mortgage lenders for low and no down payments

Jan 13, 2023 By Susan Kelly

If you're like most prospective homeowners, saving for a down payment is one of your main concerns. If you want to buy a house quickly rather than waiting months or even years, finding a lender who offers low- or no-down-payment mortgages could be crucial.

Eligible homebuyers can make zero down payment with VA loans from the Department of Veterans Affairs or USDA loans from the United States Department of Agriculture.

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The Federal Housing Administration guarantees loans with down payments of as little as 3.5%. These days, conventional mortgages can be obtained with a down payment as low as 3%.

Although government loans have lower down payment requirements and easier eligibility standards, certain private loan programs offer similar benefits.

You can close a house purchase faster if you put less money down. While a lesser down payment may seem appealing, weighing the benefits and drawbacks of each choice before making a final decision is crucial.

Low and no-down-payment mortgage loans: their benefits and drawbacks

In favor: The requirement of a significant initial deposit can be waived. That's great news since it speeds up buying a home and accumulating equity.

What's bad: Additional costs apply to low and no-down payment mortgages.

Mortgage insurance is a form of protection for the lender that is required for all loans with down payments below 20%, including conventional loans, FHA loans, and USDA loans. The VA financing charge is a one-time fee associated with VA loans.

Mortgages with little or no down payment typically require a higher credit score.

FHA loans: A credit score of 580 or higher is required to get the 3.5% down payment on an FHA loan. A 10% down payment is required if your credit score is between 500 and 579.

Common sense mortgages: With traditional loans requiring little or no money down, a credit score of 620 or higher is generally demanded. The HomeReady and Home Possible conventional loans are specifically designed for low- and moderate-income households.

Veterans Affairs (VA) loans: Veterans Affairs (VA) loans are designed for veterans and active-duty service members. Lenders' minimum credit score requirements for VA loans might vary, but many need customers to have at least 620 or meet other criteria.

Homebuyers in rural and sometimes suburban regions may qualify for a USDA loan. Those who apply with a credit score of 640 or higher may be considered for expedited processing. Applicants with lower credit scores face a stricter underwriting process. USDA loans allow borrowers to use alternative forms of credit information, such as on-time rent and utility payments, to qualify even if they do not have a credit score.


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What are some options for no- or low-down-payment mortgage loans?

You can avoid making a down payment or paying mortgage insurance by using a VA or USDA loan to finance the purchase of a property. In the event of a mortgage default, the fees associated with both loans might be used to cover the expense of repossession.

Can I get a mortgage with a small or no down payment if this is not my first time purchasing a home?

Low down payment mortgages are only available to first-time buyers. First-time buyers like FHA loans due to the low down payment requirement (3.5% vs. 10%) and more lenient credit score standards. If all borrowers on a 3% down conventional loan, like HomeReady or Home Possible, are first-time buyers, the lender typically mandates that they take a homeowner education course.

In conclusion

There has been a lot of talk about the importance of a 20% down payment, but saving that much money might take a lot of work for many potential buyers as property prices rise. Don't let the fact that you'll need a sizable down payment prevent you from trying to become a homeowner. Depending on the program, you can put zero or a very small amount down on a home. Look at different loan options and, more importantly, different lenders. You can receive the best mortgage rate that works with your finances if you shop around and compare offers.

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