It’s commonly believed that you must be able to come up with a 20% down payment to buy a house. This perception stops many people from even looking for a house. They don’t have the money for a large down payment, so they don’t even bother to look. That’s a mistake. The truth is, you can buy a house with a very low or even no down payment if you meet certain qualifications.
The lack of having a sufficient down payment shouldn’t stop anyone from buying their first home. Many lenders have programs for low- or no-down-payment buyers to take advantage of to make homeownership a possibility, even if you don’t have a ton of expendable cash to make it happen.
The best low- or no-down-payment mortgages 2020
- Suntrust Bank — Best for a variety of loans for first-time buyers
- Flagstar Bank — Best for focusing on low- and no-down-payment loans
- Quicken Loan — Best for applying over the phone or online
- Navy Credit Union — Best for $0-down military personnel
- Bank of America — Best for buyers who prefer bank mortgages
- CitiBank — Best for low- to moderate-income buyers
- Chase Bank — Best for buyers with low credit scores
- Fannie Mae — Best for qualifying with total household income
|Lender||30-Year Fixed APR||Minimum Down Payment||Key Feature|
|Suntrust Bank||3.490%||3%||Online application and loan tracking|
|Flagstar Bank||Must receive a personalized quote||3%||Personal quotes for several mortgages|
|Quicken Loans||Must receive a personalized quote||10%||Nation’s largest mortgage lender|
|Navy Credit Union||2.750%||N/A||Accepts nontraditional credit history|
|Bank of America||3.500%||3%||Works with state down payment assistance programs|
|CitiBank||3.625%||3%||Discounts for Citibank customers|
|Chase Bank||3.500%||3%||Offers reduced PMI rates|
|Fannie Mae||Must receive a personalized quote||3%||Drops PMI at 80% loan-to-value|
*Based on the as-low-as advertised rate as of 2/6/2020
The 8 best lenders for low- or no-down-payment mortgages of 2020
Suntrust Bank — Best for a variety of loans for first-time buyers
SunTrust is one of the nation’s largest banks with branches and is located in 10 states across the East Coast. In addition to conventional mortgages, SunTrust offers low-down-payment mortgages with 3% down through Fannie Mae and Freddie Mac and 3.5% down through the Federal Housing Authority with an FHA loan. These offers are great for first-time homebuyers who may not have a substantial credit history or a large amount saved for a 20% down payment.
The minimum acceptable credit score is 620 with a debt-to-income ratio that doesn’t exceed 43%, though higher debt-to-income ratios might be acceptable in some cases for applicants with higher credit scores. Per its website, SunTrust also states it charges a 0% origination fee, which can be appealing for those who have limited funds for fees. Applications can be made online, by phone, through the bank’s mobile app or in person at a local branch office.
Flagstar Bank — Best for focusing on low- and no-down-payment loans
Flagstar Bank is based in Michigan and is licensed to originate home mortgages in 50 states. The bank has retail operations in more than half of these states and accepts applications from a network of more than 2,000 mortgage brokers across the country. This lender offers the full range of government-insured mortgages such as FHA, VA, USDA and government-backed mortgages from Fannie Mae and Freddie Mac. Down payments can be as low as 0% for VA loans and USDA loans, 3% for Fannie Mae’s HomeReady program and 3.5% for FHA loans. You can fill out an application online or in person at one of the bank’s branches in Michigan, Ohio, Wisconsin, Indiana or California.
A disadvantage of Flagstar is that it charges underwriting and processing fees that add up to $1,295 for each application. Also, it does not disclose rates online and you have to request a personalized quote.
Quicken Loans — Best for applying over the phone or online
Since its inception in 1985, Quicken loans has become one of the nation’s largest mortgage lenders. It is licensed to originate mortgages in all 50 states. In addition to traditional fixed-rate and adjustable-rate mortgages, Quicken Loans offers no- and low-down-payment mortgages backed by FHA, VA, USDA, Fannie Mae and Freddie Mac. Quicken Loans is an especially large producer of FHA loans, working with FICO scores as low as 580 and debt-to-income ratios up to 60%. While Quicken Loans does not have face-to-face service, it does have a top-notch website and highly-rated customer service. The website is very high-tech and has an on-demand service for applicants who want to talk with live representatives.
If you’re satisfied with not having any personal contact at all, then Quicken Loans Rocket Mortgage is the way to go. Applications through Rocket Mortgage are done completely online with data verified over the internet.
Quicken Loans also has a unique 1% down option for qualifying buyers. For this program, applicants must have a FICO of 680 or higher, a debt-to-income ratio less than 45% and earn less than the median income for the county of the residence.
Navy Credit Union — Best for $0-down military personnel
The Navy Federal Credit Union is designed to meet the needs of military members and their families. Its loan officers are trained to deal with first-time homebuyers, especially during times of deployment and relocations. This credit union offers 100% financing to members of the military, has an upfront funding fee of 1.75% and does not require mortgage insurance.
This lender is also willing to consider non-traditional credit data, such as rent and utilities, for applicants with incomplete credit histories.
Bank of America — Best for buyers who prefer bank mortgages
For borrowers who may prefer a traditional bank, Bank of America offers the Affordable Home Solution program. This program only requires a 3% down payment through Freddie Mac or its Affordable Loan Solution mortgage, and it will accept alternative credit data. However, it does have an application fee that can exceed $1,000, along with several other closing costs that can range from 2% to 5% of the loan.
You’ll need a FICO score above 660 to qualify and a debt-to-income ratio of less than 43%. The good news is that private mortgage insurance is not required. Also, Bank of America offers affordable housing programs where borrowers can receive grants for funds to put toward their down payment or closing costs.
CitiBank — Best for low- to moderate-income buyers
The CitiBank HomeRun Mortgage is designed for low to moderate-income buyers. Down payments can be as low as 3%, but at least 1% must come from the buyer’s funds. The balance can come from relatives and gifts. Unlike FHA, a HomeRun mortgage does not have an upfront payment for mortgage insurance or ongoing monthly premiums. The goal is to keep monthly mortgage payments low with competitive rates so more people can buy houses.
Although the stated minimum credit score is 640, Citi may finance borrowers with lower scores at higher interest rates. One drawback of the HomeRun mortgage is that to qualify the borrower’s income cannot exceed 80% of the area’s median income. Many other lenders do not have income restrictions.
Chase Bank — Best for buyers with low credit scores
The Chase DreaMaker mortgage program may provide qualifying borrowers with as much as $3,000 to put toward their down payment or closing costs on a new home. The program has a low 3% down payment requirement to make homeownership dreams a reality. There is no upfront mortgage insurance charge and monthly PMI fees can be lower compared to other loans.
This program accepts credit scores as low as 620 and debt-to-income ratios up to 45%. However, it does restrict the borrower’s income to no more than the median income for the area where the property is located.
Fannie Mae — Best for qualifying with total household income
FNMA, or Fannie Mae, is a government-sponsored institution that is a source of mortgage financing. One attractive offering is the HomeReady program. This program only requires a 3% down payment and a minimum credit score of 620. It also allows a debt-to-income ratio of up to 50%.
A unique feature of the HomeReady program is that you can use the income of anyone living in your house to qualify for a mortgage. This includes parents, grandparents, cousins and even roommates. Rental income from a basement apartment or mother-in-law unit is also considered. It does not require a personal contribution to the down payment from the borrower and the entire amount can be gifted from a friend or relative, which is not the case with traditional mortgage loans.
What is a low- or no-down-payment mortgage?
The common perception is that you must make a down payment of 10% to 20% of the price of the house to obtain a mortgage. Fortunately, that perception is not true. Many lenders have programs that offer lower down payments and even zero down payments on loans. FHA loans only requires 3.5% down payments, and numerous banks have programs for eligible buyers that only require 3% down and the VA will finance up to 100% for military personnel.
How should I choose the right low- or no-down-payment mortgage?
Start by finding your credit score and matching it with lenders who will accept your credit history. Be aware that while government-backed loans from Fannie Mae, Freddie Mac and FHA set individual minimum requirements, private-sector mortgage lenders may impose stricter underwriting standards. For example, FHA requires a minimum credit score of 580, but some lenders may bump this requirement up to 620 or higher. You’ll need to find lenders who will work with your particular situation and down payment availability.
Lenders will have different debt-to-income ratio requirements. You have to work with a lender that will accept your particular financial situation.
Most importantly, compare the costs from several lenders: interest rate, PMI fees, upfront costs and application fees. Each mortgage program is different and has its unique quirks.
The bottom line
Shop around. Many lenders have programs with low- or no-down-payment requirements. Some have higher credit standards but many have programs for those buyers with low credit scores. Each program will have different requirements for the amount of upfront cash needed for mortgage insurance and closing costs. If you look hard enough, you will be able to find a program that fits your situation.