One of the easiest loans to qualify for with a small down payment is a Federal Housing Administration (FHA) loan. The Federal Housing Administration doesn’t fund the mortgage, but it does guarantee the loan. With an FHA loan, you can pay as little as 3.5% for a down payment.
Another government-backed program is a USDA loan, which can help you buy a home with a zero-down payment. You have to buy in an eligible rural or suburban area, however, as long as you meet the income, credit, and location requirements, you can get 100% financing.
A VA loan is another option designed to help you get home loans with no down payment. Depending on your status with the military and other factors, you might be able to get a mortgage without any money down.
Ideal HomeReady Mortgage Borrowers:
Freddie Mac Home Possible mortgages offer a down payment option as low as 3% for low to moderate-income homebuyers or buyers in high-cost or underserved communities.
You will need to meet minimum credit requirements, earn no more than 100% of your area median income, and have the funds to meet the down payment requirements and closing costs. In addition, first-time homebuyers must participate in an acceptable borrower education program, like Freddie Mac’s CreditSmart.
In most cases you will pay mortgage insurance if you don’t have 20% down, so you need to factor this cost into your total expense. This serves as an added insurance policy that protects the lender if you are unable to pay your mortgage. With HomeReady and Home Possible, you may have the option to cancel your mortgage insurance once your home equity reaches 20%, which can result in lower monthly payments down the road.
If you’re struggling to save the money for a big down payment, there are a number of options still available, and we can find one that is right for you.