Guide to Low Down Payment Mortgage Options
It may seem like mortgages that let you pay a small down payment are few and far between. However, they’re the norm. A National Association of Realtors 2017 survey said 88% of home buyers financed 90% of their home purchase. New home buyers financed 95%. The most common down payment is between 5-to-10%.
Most programs that offer low down payments are designed to help people who meet very specific criteria. Some programs, for example, are only for people with really high credit scores, and others are for people whose scores aren’t so great, but who have other factors that can influence a positive loan decision. Here are some of the options:
Zero Down Mortgage Loans
The Veterans Administration (VA)
- Zero-down loans for eligible veterans
- Up to $484,350 in 2019 in most parts of the country with no down payment, so long as the property appraises for the asking price, and the veteran is income and credit qualified.
- No maximum debt ratio. Debt to income ration is how much you pay in debt per month divided by your monthly gross income. If the debt ratio is more than 41%, lenders have to come up with compensating factors to justify the loan.
- No minimum credit score requirement. The VA requires lenders to base a decision on the veteran’s entire loan profile.
The United States Department of Agriculture (USDA)
- Zero-down loans for eligible home buyers in specified areas
- Lots of rules about where the property is located and who is buying it. For example, the home must generally be under 2,000 square feet and have no in-ground swimming pool.
- Payment assistance is available.
- Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower. When modified by payment assistance, those rates can be as low as 1%.
- Applicants have up to 38 years to pay the loan back, depending on their income.