If you don't have a large down payment saved up, don't worry—there are plenty of options available, and you don't need to put down the traditional 20%. In fact, many homebuyers are able to secure a home with as little as 3% or even no down payment at all.
No money down mortgage options
If you're a military service member, veteran or eligible surviving spouse, you might qualify for a VA loan guaranteed by the U.S. Department of Veterans Affairs (VA) with no money down. Unlike a conventional loan, there's no mortgage insurance requirement for a no-down payment VA loan.
FHA loans require a minimum 3.5 percent down payment for borrowers with a credit score of 580 or more. Borrowers with a credit score of 500 to 579 need to put 10 percent down. Conventional conforming mortgages only require 3 percent down, and VA and USDA loans require no down payment.
If your down payment is less than 20% and you have a conventional loan, your lender will require private mortgage insurance (PMI), which is an added insurance policy that protects the lender if you can't pay your mortgage.
While you can qualify for a conforming conventional mortgage with a down payment of 5% or even 3%, you can expect a lender to want at least 20% down with a jumbo loan. Another difference between conforming and non-conforming conventional home loans is the interest rate.
Which loan is better: FHA or conventional? To a large extent, that depends on you and your financial profile. Generally, a conventional loan is best for those with strong credit and a bigger home buying budget. If your credit score is below 620, a loan backed by the FHA might be your only option.
Can I get an FHA loan with no down payment? No. FHA loans require at least 3.5% down for borrowers with credit scores of 580 or higher, and a 10% down payment from borrowers with scores between 500-579. The USDA and VA loan programs offer 0% down payment mortgages, but you must meet the eligibility requirements.
FHA minimum credit score
If you put just 3.5 percent down, the minimum credit score for an FHA loan is 580. You can qualify with a score as low as 500, but you'll need to make at least a 10 percent down payment.
While most conventional and FHA loans require a minimum 3% to 3.5% down payment, there are unique options available for specific groups, such as veterans and rural home buyers with moderate to low incomes, that allow for zero down payments.
What Credit Score Do You Need for a No Down Payment Home Loan? If you're hoping to purchase a home without a down payment, you'll have to prove a specific income and have a credit score that's at least in the mid-600 range.
Mortgages with down payments of less than 20% will require PMI until you build up a loan-to-value ratio of at least 80%. You can also avoid paying PMI by using two mortgages, or a piggyback second mortgage.
Mortgage Insurance: Private Mortgage Insurance (PMI) is usually required when you have a conventional loan and make a down payment of less than 20 percent of the home's purchase price. PMI serves to protect the lender if the buyer stops making payments on the loan.
Federal Housing Administration (FHA) loans are in a category of mortgages called government-insured mortgage loans, also known as government-backed mortgage loans. FHA home loans were created to help people, especially first-time buyers and seniors, become homeowners.
The FHA program is not a no down-payment option.
Enter Government-Backed Loan
Government-backed loans, such as Federal Housing Administration (FHA) loans or Veterans Affairs (VA) loans, often have lower down payment requirements and may not require PMI.
A bigger loan: Putting down less upfront means borrowing more to make the purchase, which makes for higher monthly payments and more interest paid over time. Higher costs: Your mortgage interest rate and loan costs could be higher if you put down less upfront.
FHA Loan: Cons
Here are some FHA home loan disadvantages: An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan. Home price qualifying maximums are set by FHA.
FHA Rates for 700 Credit Score
As of early October 2024, the national average interest rates for FHA loans have shifted significantly compared to previous months. Here are the figures for FHA mortgage rates for borrowers with a 700 credit score: 30-Year Fixed Rate FHA Mortgage: Approximately 6.03%.
FHA loan program down payment minimums are 3.5% for borrowers with FICO scores at 580 or better. FHA loan program rules for borrowers with FICO scores between 500 and 579 require a 10% down payment, but nothing as high as 20%.
It's possible for first-time home buyers to get a conventional mortgage with a down payment as low as 3%.
Conventional mortgages with Private Mortgage Insurance (PMI) Many lenders allow homebuyers to take out conventional mortgages with less than 20 percent down as long as they pay for private mortgage insurance—PMI for short. This is a type of insurance that protects the lender if you miss loan payments.
The Takeaway. If you're looking to buy a home, FHA loans with low down payments may be an attractive option to consider. To qualify for an FHA-insured loan, you need a minimum credit score of 580 for a loan with a 3.5% down payment, and a minimum score of 500 with 10% down.