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Best Low Down Payment Mortgages For First-Time Buyers

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There are several opportunities for home buyers to purchase their first home with a low down payment mortgage.

Buyers can qualify for mortgages with 3 percent down, and low down payment mortgages are available with $0 down. First-time home buyers save a median 7 percent for a down payment, but even that isn’t required.

You don’t need to save tens of thousands of dollars, or use your 401(k) savings to have enough money to buy a home. Below are mortgages and down payment assistance programs available to help turn your homeownership dream into a reality. 

Low down payment mortgages include:

Conventional Loans | 3% Down

Conventional loans are the most commonly used loan, offering financing with as little as 3 percent down. They have higher FICO score requirements than some government-backed loans.

Buyers have no restrictions on the house styles they can purchase or property location. Buyers can manage their property taxes and insurance independently and choose to open an escrow account to group these costs with monthly mortgage payments as they prefer. 

Let’s take a look at what you need to buy a house.

What’s needed?

  • Credit score: 620+
  • Down payment: 3 percent

Is mortgage insurance required?

Mortgage insurance is required for buyers financing more than 80 percent of their home purchase. Mortgage insurance can be canceled once owners reach 20 percent equity. Mortgage insurance typically costs $30-$70 a month for every $100,000 borrowed. 

Can I use cash gifts for the down payment?

Yes, you can use cash gifts from family, including immediate family, partners, and legal guardians.

How can I get pre-approved?

Check your eligibility for a conventional loan.

FHA Loans | 3.5% Down

FHA loans have a slightly higher down payment requirement than conventional loans with fewer restrictions for buyers with lower credit scores. 

Lenders prefer a credit score of 580 or higher. Buyers who make a 10 percent down payment or more are eligible with a score as low as 500. Buyers can also use down payment assistance from Homebuyer.com to cover their down payment and make an offer on a house

Learn more about FHA Loans.

What’s needed?

  • Credit score: 580+
  • Down payment: 3.5 percent

Is mortgage insurance required?

Mortgage insurance is required, regardless of the down payment. Mortgage insurance is paid through an up-front premium and a recurring annual premium that’s paid monthly.

Can I use cash gifts for the down payment? 

Yes, you can use cash gifts from friends, family, employers, and other sources for a down payment. 

How can I get pre-approved?

Check your eligibility for an FHA loan.

Get pre-approved for a mortgage today.

Down Payment Assistance from Homebuyer.com

Homebuyer.com can cover the down payment on FHA mortgage loans.

Here’s how it works:

Buyers can choose between 3.5 percent or 5 percent down payment assistance through a small second loan. Both programs require buyers to have a credit score of 640 or higher.

Middle-income earners or lower can secure a second loan with no monthly payments or interest charges. The 3.5 percent second loan covers your down payment and is forgivable after 36 months of consecutive, on-time payments.

The 5 percent down payment assistance loan covers your down payment and a large portion of your closing costs. The 5 percent loan is forgivable after 10 years of payments that don’t fall more than 60 days behind. 

High-income earners can qualify for this assistance, as well. There will be a monthly payment and you have two options to choose from.

Both the 3.5 percent and 5 percent loans offer a 10-year loan with 0 percent interest or a 30-year loan with 5 percent interest. 

Down payment assistance typically has income and credit history requirements. Some first-time buyers may also need to enroll in home buyer education. 

Illustration: The benefits of owning a home

Check out our Homebuyer curriculum for first-time home buyers to learn more about home buying. 

If you’re interested in getting down payment assistance, apply today.

USDA Loans | 0% Down

USDA loans have no down payment requirements, so you can purchase a home with $0 down. The credit score requirements align with conventional loan programs with a 620 minimum.

While buyers must purchase a home in an eligible location, USDA loans aren’t restricted to farmland. They’re available for homes in small towns, the suburbs, and anywhere that’s not a densely-populated city. Buyers can check their location’s eligibility with the USDA eligibility map.

What’s needed?

  • Home in an eligible location
  • Credit score: 620+
  • Down payment: $0

Is mortgage insurance required? 

Mortgage insurance isn’t required, however, there is a USDA guarantee fee that functions the same way. This guarantee fee is paid through an up-front premium and a recurring annual premium that’s paid monthly. 

Can I use cash gifts for the down payment?

Yes, you can use cash gifts from anyone who isn’t an interested party involved in the home buying process to fund the down payment. 

How can I get pre-approved?

Check your eligibility for a USDA loan.

VA Loans | 0% Down

VA loans are available for active-duty U.S. military service members, their spouses, and veterans who meet eligibility requirements. This is another no down payment loan option with lower credit score requirements than USDA loans. 

VA loans don’t have location restrictions or credit score requirements, though most lenders require a score of 580 or higher for approval.

What’s needed?

  • Credit score: 580+
  • Down payment: $0

Is mortgage insurance required?

VA loans don’t require typical mortgage insurance, though the borrower is responsible for a one-time funding fee, or “guaranty fee,” which functions similarly. This may be financed into your mortgage or paid in full at closing.  

Can I use cash gifts for the down payment?

Yes, you can use cash gifts from anyone who isn’t an interested party involved in the transaction to fund the down payment. Your lender will likely require a down payment gift letter to verify the donation. 

How can I get pre-approved?

Check your eligibility for a VA loan.

Final Thoughts

Buying a home with a low down payment is easily achievable with the right loan.  Conventional, FHA, VA, and USDA loans are all options with a low down payment. Plus, Homebuyer can offer down payment assistance to help cover the down payment on FHA loans.

Remember, before you can get a mortgage, you’ll need to get pre-approved. 

Happy homebuying.

Get pre-approved for a mortgage today.

Dan Green
Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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