Best Mortgage Lenders For Low Down Payment

    Best Mortgage Lenders For Low Down Payment: Top 8 Lenders Of 2021

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    Most people believe that you need to make a 20% down payment before you can take out a mortgage. But that's not always the case – there are a few companies that offer low-down-payment mortgage deals. By working with these lenders, you don't have to save money for months or years before you can buy a home.

    In this guide, we'll introduce some of the best lenders for low or no-down-payment mortgages. We'll also guide you through the basics of getting a home loan.

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    Pros And Cons Of A Low-Down-Payment Loan

    A low down payment mortgage isn't for everyone. Before you take the plunge, you should first learn the pros and cons.


    • Low-down-payment mortgages can be advantageous because they allow you to become a homeowner and begin building home equity as soon as possible. That way, you don't have to pay rent on a property that will never be yours.
    • Another advantage of getting a low-down-payment mortgage is that you can lock in current mortgage rates. Rates hit record lows in 2020, but experts suggest that rates are likely to inch upward in the future, so it's best to get a deal as soon as possible.
    • The most important advantage of getting a low down payment mortgage is that you don't have to deplete your life savings just to start building equity on a home. It leaves you with a sizable emergency fund in case something unexpected happens, like a natural disaster or a medical emergency.


    • Low down payment mortgages come with additional fees. You might be charged higher mortgage rates for low down payment loans.
    • Most lenders require borrowers to pay mortgage insurance if they don't make a 20% down payment. Private mortgage insurance protects the lender in case you fail to pay your monthly amortization.
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    Top Mortgage Lenders For Low Down Payment Loans

    Looking for lenders that offer low down payment mortgages isn't easy, but we're here to help! Here's a list of some of the best mortgage lenders in the United States. We based this list on the number of loan options offered, the convenience of their application processes, and their flexibility in evaluating borrowers.

    1. Rocket Mortgage

    Min Credit Score: 620

    Min Down Payment: 3% (for conventional mortgages)

    Getting a low down payment mortgage is easy with Rocket Mortgage, an online lender. By making a 3% minimum down payment for conventional mortgages, you can take out a loan to buy a home.

    Aside from conventional loans, you also have the option to take out government-insured loans from Rocket Mortgage. You can use any of these to buy a home or refinance your current one. Keep in mind that Rocket Mortgage follows the same loan interest rates as Quicken Loans. Both companies are under the parent company, Rock Holdings.

    Being an online lender, Rocket Mortgage gives you the ability to complete the home loan application process on their website. The platform can pull your credit data, show you your loan choices, and give you the option to lock in your mortgage rates after approval.

    2. New American Funding

    Min Credit Score: 620

    Min Down Payment: 3%

    New American Funding is a national mortgage lender that offers a variety of mortgage options for purchase, refinancing and more. Aside from conventional mortgages, they also provide some government-backed (FHA, VA) loans.

    New American Funding has several programs for first-time buyers. It works with down payment assistance programs in 14 states, including California, Texas, Florida, and Illinois.

    The company also uses manual underwriting to evaluate potential buyers. This allows them to look at each borrower's financial history more deeply instead of relying on automation.

    But if you prefer to work with a loan officer, New American Funding can also be a good fit for you. Just contact your local branch to begin the process.

    3. Quicken Loans

    Min Credit Score: 620

    Min Down Payment: 3% (for conventional loans)

    Quicken Loans is another volume lender that offers low down payment mortgages. You can choose from an array of fixed-rate or adjustable-rate home loans for purchase and refinancing. If you're buying a more expensive property, you can also turn to Quicken Loans for jumbo loans.

    As with its sister company Rocket Mortgage, Quicken Loans offers conventional loans for a minimum down payment of 3%. You can also turn to the company for VA and FHA loans.

    However, like Rocket Mortgage, applying for a low down payment mortgage at Quicken Loans will require a hard credit inquiry. Mortgage rates and lender fees are also higher than the median.

    4. Flagstar Bank

    Min Credit Score: 620

    Min Down Payment: 3% (for conventional loans for first-time homebuyers)

    Flagstar Bank is a savings bank from Michigan that offers home loans in all 50 states. While the bank ranks well in most categories, keep in mind that some of its products may not be available in your area.

    The lender only has retail locations in about half of the states, but you can also use the company website to begin your application. A loan advisor will contact you should you wish to proceed.

    Aside from low-down-payment conventional loans, you can turn to Flagstar Bank for an FHA loan or a VA loan. FHA loans require only a down payment of 3.5%, while VA loans allow zero down payment.

    5. PNC Bank

    Min Credit Score: 620

    Min Down Payment: 3% (flexible down payment options)

    PNC Bank is a retail and commercial bank that offers low down payment mortgage deals throughout the United States. You can choose from conventional and government-backed loans if you want to buy a house, build home equity, or refinance an existing property.

    The bank specializes in helping borrowers with low-to-moderate income. Borrowers only need to make a 3% down payment and can also use cash gifts as part of the payment.

    Note that PNC Bank does not offer mortgages for renovation. Additionally, in-person service may not be available in your state.

    6. SunTrust

    Min Credit Score: 620

    Min Down Payment: 3% (for conventional loans)

    SunTrust is another lender that offers low down payment mortgages. Borrowers can get a conventional mortgage for as low as a 3% down payment. You can also get fixed-rate or adjustable-rate mortgages with fixed periods of 5, 7, or 10 years.

    As with other lenders, you can get a loan for most purposes, such as home purchase, refinance, home equity, and more. Jumbo loans and government-supported mortgages are also available.

    Anyone who wishes to take out a loan with SunTrust can apply online. They'll send you personalized mortgage rates and allow you to upload documents to the system.

    Unfortunately, while the mortgage lender offers reasonable rates and has a convenient application process, you won't find many branches unless you're in the southeastern United States.

    7. Navy Federal Credit Union

    Min Credit Score: N/A

    Min Down Payment: 0% (for military families)

    Navy Federal is a credit union that offers lower rates compared to most lenders and allows borrowers to apply online. Keep in mind that credit union membership is limited to veterans, current members of the military, some federal employees, retirees, and contractors.

    Members of the union can choose from a variety of low- and zero-down mortgage loans. You can also choose from 15- to 30-year fixed-rate contracts, VA loans, adjustable-rate mortgages, and jumbo loans.

    The credit union's digital platform allows borrowers to start their applications online. Loan officers are allowed to look into alternative credit data, such as your rent payments and bills, instead of relying on a potential borrower's credit score.

    8. Bank of America

    Min Credit Score: 580-640

    Min. Down Payment: 0% - 3.5%

    Bank of America offers multiple low-down payment options. For instance, you can apply for a VA loan, which does not require a down payment. You can also look into the Affordable Loan Solution program, which requires only a 3% down payment on loans up to around half a million.

    One advantage of borrowing from the Bank of America is that it has a fully online application process. The lender also considers alternative credit data, such as rent, utility, and cellphone payments. 

    Finally, the bank has an outstanding reputation among borrowers. It has an A+ rating with the Better Business Bureau.

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    Understanding Your Low-Down-Payment Options

    Before you decide on the lender you want, it's best to understand the available loan types. Here are some of the most common loan options available:

    Conventional Loans With Mortgage Insurance

    Conventional loans or mortgages refer to loans that are not secured by any government entity. As such, they have stricter requirements. You can get conventional mortgages from banks, credit unions, and mortgage firms.

    Fannie Mae and Freddie Mac offer a program called Conventional 97. Under this program, you will only be required to make a 3% down payment. It's generally a less expensive option compared to getting a mortgage backed by the Federal Housing Administration (FHA).

    Government-Backed Mortgages

    These loan types are guaranteed by government organizations. Lenders are often less strict when it comes to issuing these types of loans because the government can offset their losses in case the borrower defaults on their mortgage.

    You can take out a mortgage-backed by government entities like the FHA, VA, USDA, etc.:

    • U.S. Department Of Agriculture (USDA) loan: USDA loans are generally designed for people buying rural properties, but it's sometimes available for people who want to purchase homes in suburban neighborhoods. The interest rate loan backed by the U.S. Department of Agriculture is also lower compared to most types of mortgages.
    • Department Of Veterans Affairs (VA) loan: As with USDA loans, you can get VA loans with zero down payment. This is available for people on active duty or veterans who were honorably discharged from service. People who have spent at least 6 years in the Reserves or National Guard are also eligible, along with spouses of military members who were killed in action. VA loans, however, require you to pay a funding fee.
    • Federal Housing Administration (FHA) loan: The FHA allows a down payment of just 3.5% in all US markets. You can also accept a cash gift from someone else and put it toward your down payment.

    Piggyback Loan

    This option is best for buyers with high credit scores. It's called a piggyback mortgage because you'll need to take out two loans in order to complete the purchase price.

    It has an 80/10/10 structure, which is divided according to the following:

    • 10%: You need to make a down payment that's equal to 10% of the home's purchase price. This is paid in cash upon closing.
    • 80%: Most of the home's purchase price will be borrowed from a lender under the Fannie Mae and Freddie Mac program.
    • 10%: This is usually covered by home equity loans or home equity lines of credit. These loan types offer better rates and more flexibility.
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    FAQs On Low Down Payment Mortgage

    Getting a mortgage with a low min. down payment can get a little confusing, but we're here to help. In this section, we've answered some of the most common questions on the topic.

    What is the down payment for?

    Lenders require a down payment because it lowers the risk of lending you money to finance a home.

    What are Fannie Mae and Freddie Mac?

    These are two home mortgage companies created by the U.S. Congress. They buy and guarantee mortgages issued through lenders. Together, they offer ongoing support to mortgage companies by making more money available for residential mortgage financing.

    Can cash gifts be used as a down payment?

    Yes. You can use the money you've received from a close friend or relative to make a down payment on a home. However, keep in mind that the lender will want to verify that you've received the money as a gift. You must provide photocopies of the checks or wire transfer receipts.

    Do I need to have a high credit score to get a low/no-down-payment mortgage?

    It depends on the lender. For instance:

    • You need at least a 580 credit score to qualify for a 3.5% down payment on an FHA loan.
    • You need a credit score of 500 to 579 to qualify for a 10% down payment on an FHA loan.
    • You need a minimum credit score of 620 for a conventional loan or VA loan.
    • You need a credit score of 640 or higher to get a USDA loan with faster processing. People with lower credit scores will need to provide additional credit information.

    Are there income limits to getting a low-down-payment mortgage?

    Sometimes. Usually, first-time buyers are exempt from these limitations. A veteran taking out a VA loan is also exempted.

    Do I have to be a first-time homebuyer to get a low down payment mortgage?

    Usually, no. Most low down payment mortgage programs help people with low-to-moderate income, not just first-time homebuyers.

    Are there payment assistance programs that can help me get a mortgage?

    Yes. More than 2,500 down payment assistance programs exist in the country. Eligibility requirements vary, but you're more likely to be eligible if you're a first-time homebuyer or a person with a low income.

    One of the largest assistance programs is HomeReady Mortgage by Fannie Mae. It's available to first-time homebuyers and repeat buyers with credit scores higher than 620.

    You can also consider the Freddie Mac Home Possible mortgage payment assistance program, also designed for low-to-moderate-income families. It has a 3% down payment requirement.

    What is private mortgage insurance (PMI) for?

    Mortgage insurance protects lenders if the borrower stops making payments on their home loan. If you're taking out a low down payment home loan, you'll usually be required to buy mortgage insurance.

    While mortgage insurance is mainly designed to protect the lender, it can also offer some advantages to homebuyers. Getting mortgage insurance enables you to qualify for a loan that you would otherwise be unable to get. Some companies also allow you to convert mortgage insurance to permanent life insurance.

    How do I choose the best mortgage?

    Once you've shopped around and learned more about your loan options, it's time to choose the best one. Here are some of the factors you should consider:

    • Interest rate: Interest refers to the amount charged by the lender in exchange for financing your home purchase. The higher the rate, the larger your monthly payments will be.
    • Closing costs and fees: Every mortgage deal comes with closing costs and associated fees. Check lender origination fees, application fees, and document preparation fees before choosing which lender to go for.
    • Qualifying requirements: Requirements for approval usually vary from one lender to another, especially for conventional loans. Those with stricter requirements might charge lower interest, so don't write off a lender just because they have a more tedious underwriting process.

    Approval time: Check how fast the lender can close the deal. Some home sellers will require you to close the deal as fast as possible or else you risk losing the property to someone else.

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    Final Thoughts

    Making a down payment is one of the largest obstacles to homeownership. Thankfully, there are plenty of mortgage lenders that only require low down payments.

    If you want more information, get in touch with Wesley Mortgage, LLC! We'll help you learn more about your low down payment mortgage options and find the best lender for you.

    Written By Ed Wallace
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