One of the most common misconceptions about buying a home is that you need at least 20% down payment.

You’ll soon realize that you do not need 20% down and, in fact there are down payment options as little as 0% down! You might be thinking that you have to be a first time home buyer to qualify for such low down payments, but that is not the case either.  Each program has certain requirements that must be met in order to qualify, but you’ll likely be surprised that most people can use at least one of these great no & low down payment mortgage options.

Here are the 6 best no & low down payment mortgage options…


1. VA* (as little as 0% down)

First of all, if you are a veteran or currently serve in the military, thank you!

VA mortgage loans are one of the best home loan options out there with a down payment as low as 0%, no monthly mortgage insurance and no minimum credit score. 

Eligibility for VA home loans depend on several factors. You may be eligible if you meet one or more of the following:

  • 90 days served during wartime
  • 181 days served during peacetime
  • 6 years of service in National Guard or Reserves
  • Surviving spouse of service member who died in line of duty or as a result of service-related disability

Check out the VA home loan website for full eligibility details.


2. USDA* (as little as 0% down)

The United States Department of Agriculture offers a Rural Development mortgage loan option most commonly referred to as a USDA Home Loan.

USDA’s Rural Development mortgage offers up to 100% financing (0% down) to home buyers earning less than 115% of the area median income purchasing in a rural area.

Let’s break this down…

Area Median Income

Area median income is determined and released annually by the U.S. Department of Housing & Urban Development.

You can use USDA’s income eligibility tool to see if you qualify.

Rural Area

USDA sets the eligibility areas and the easiest way to determine if you are looking to purchase in an eligible area is to use the property lookup tool on their website.


3. Fannie Mae 97% (as little as 3% down)

There are two options for conventional mortgage loans – Fannie Mae & Freddie Mac.

Fannie Mae offers a mortgage option with a down payment as low as 3% if at least one of the borrowers is a first time home buyer.

This means that if a husband and wife are looking to purchase together but one of them has owned before while the other is a first time home buyer they can use this program allowing them to put as little as 3% down.

The nice part about this mortgage option is that there is no income limits and no geographical requirements to qualify.


4. Fannie Mae HomeReady® (as little as 3% down)

HomeReady® is similar to Fannie Mae’s 97% program described above without a first time home buyer requirement but it does have some other restrictions…and some benefits too!

Fannie Mae’s HomeReady® Mortgage provides lower income home buyers buy a home with as little as 3% down payment and reduced cost mortgage insurance.

Income Eligibility

Similar to USDA, Fannie Mae has an income eligibility lookup tool you can use to see if you are under the maximum income limits for the HomeReady® mortgage. Their income limits are set at 80% of area median income.

Reduced Cost Mortgage Insurance

Most mortgage options with a down payment less than 20% require you to pay mortgage insurance to protect the lender in the case you default. The HomeReady® mortgage is no different but they do offer a “discount” on the cost of mortgage insurance. Normally, the cost of mortgage insurance for a 3% down mortgage option (like #3 above) has an MI coverage amount of 35% but with the HomeReady® mortgage it is just 25%.

On a $400,000 mortgage with a credit score of 720, that could save you about $55/mo. (based on MI rates through MGIC as of July 2022)


5. Freddie Mac Home Possible® (as little as 3% down)

Freddie Mac has their own program, similar to HomeReady® called Home Possible®.

Freddie Mac’s Home Possible® Mortgage provides lower income home buyers buy a home with as little as 3% down payment and reduced cost mortgage insurance.

Freddie Mac has income limits, just like HomeReady®, set at 80% of area median income and has reduced cost mortgage insurance.


6. FHA** (as little as 3.5% down)

FHA is a great alternative to HomeReady® or Home Possible® mortgage options if your credit score has taken some hits.

FHA allows you to purchase a home with as little as 3.5% down, has no first time home buyer requirement and no income limits.

Conventional mortgage options like Fannie Mae 97%, HomeReady® or Home Possible® require private mortgage insurance which is based on several factors, one of which is your credit score. The lower your score the higher the cost of MI on a conventional loan option.  

FHA is different as does not use your credit score (or any other factor) when determining the mortgage insurance rate you pay. It is simply a a percentage of your outstanding loan balance. With a minimum down payment that MI rate is set at 0.85%.

Mortgage insurance rates can change over time and based on PMI companies but to give you an idea of how FHA’s MI rate of 0.85% compares here are the estimated MI rates (per MGIC) for the three conventional mortgage options mentioned:

  • Fannie Mae 97%: Between .0.87% and 1.86% with a credit score of 739 or lower
  • HomeReady®: 0.98% to 1.50% with a credit score of 699 or lower
  • Home Possible®: 0.98% to 1.50% with a credit score of 699 or lower

As you can see based on those MI rates, if you have a credit score under 740 it may be worth considering FHA as an alternative to conventional.

The BOttom Line

You do not need 20% down payment to make a home purchase.

There are a variety of loan options that allow for less than 20% down and six programs with minimum down payment options that are less than 5%.


53 No & Low Down Programs

In Colorado

Colorado is one of the best states to buy a home if you’re looking to buy a home with a down payment of less than 5%. Even if you’re not a first time home buyer there are numerous assistance programs available. In fact, there are 53 active programs listed below with down payment assistance up to $100,000!

*Citywide Home Loans, LLC has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency. **Citywide Home Loans, LLC is an FHA Approved Lending Institution and is not acting on behalf of or at the direction of HUD/FHA or the Federal government.