Having a large down payment to put on the table has always been a hurdle for many aspiring homeowners. This isn´t a surprise, since a traditional down payment of 20% has been a stumbling block for many buyers with not enough savings Although these difficulties exist, low down payment mortgage programs have been developed to offer alternate ways of home ownership.
In this post, we will examine five top lenders offering low-down payment mortgage programs in the United States. Before we start with the listings, it is important that you understand what the term low down payment mortgage means.
What are low-down payment mortgage programs?
Low-down payment mortgage programs (LDP) are loan options that provide homeowners with the ability to buy a house with an amount smaller than 3-5% of the home’s purchase value.
While the typical traditional mortgage demands a 20% or higher down payment as compared to low-down-payment mortgages that come with a smaller down payment upfront, down payments vary depending on the type of program and lender, but on average, they range from 3% to 5% of the cost of the home.
Because a down payment of less than the traditional 20% is likely to be required, low-down payment mortgages often involve private mortgage insurance (PMI) or mortgage insurance premiums (MIP).
This insurance indemnifies the lender in the event of non-repayment of the loan by the borrower. Borrowers might need to make a down payment and pay monthly premiums until they have purchased enough equity.
Eligibility Criteria
Lenders often consider aspects like credit score, stability of income, debt-to-income ratio, and employment history to ascertain a loan applicant’s ability to repay a loan. Some programs may have special conditions, like first-time homebuyers or income levels.
Types of Low Down Payment Mortgage Programs
- FHA Loans: Such loans supported by the Federal Housing Administration allow home buyers to make a down payment as low as 3.5%. These kinds of loans are cherished by first-time homebuyers and those with less than good credit scores.
- Conventional 97 Loans: Provided by Fannie Mae and Freddie Mac, conventional 97 loans require only 3% of the down payment and are available to borrowers with good credit.
- VA Loans: Guaranteed by the Department of Veterans Affairs, VA loans are offered to eligible veterans, active service members, and surviving spouses with no down payment.
- USDA Loans: The USDA, an agency of the U.S. Department of Agriculture, provides 100% financing to qualified borrowers in rural and small towns.
- State and Local Assistance Programs: Many state and federal governments, as well as local governments, provide down payment assistance programs and grants to help first-time homebuyers cover their down payment and closing costs.
Top 5 Lenders Offering Low Down Payment Mortgage Programs
There are so many choices to deal with, to help you make your decison, here are the top five lenders in the United States:
- Quicken Loans
- Wells Fargo
- Bank of America
- Chase
- US Bank
1. Quicken Loans
As one of the top mortgage lenders in the country, Quicken Loans is renowned for its innovative approach and reliable financial services
Well-known for its state-of-the-art technology, simple procedures, and focus on customer needs, Quicken Loans has a broad range of mortgage products, including low-down payments, designed to meet its large customers.
Key Features:
- An effective application process with the latest technology of the Rocket Mortgage platform.
- Flexible down payments, including FHA loans that, at minimum, need a 3.5% down payment amount.
- With competitive interest rates
- Extended educational resources for buyers
2. Wells Fargo
Wells Fargo has become a major player in the mortgage market over the years. The organization offers a variety of low-down payment mortgage options through its extensive branch and internet network, built to meet the individual needs and goals of potential homeowners.
Key Features:
- Down payment as low as 3 %
- A variety of mortgages include FHA loans, VA loans, and conventional borrowing with a low down payment option.
- Simple interface.
- If you have little credit history or a low credit score, you should be eligible for flexible credit standards.
- Possible to buy your first house
3. Bank of America
Among the best lenders, it requires just a 3% down payment. A fixed-rate mortgage with an affordable lending solution® can be obtained with as little as a 3% down payment. You must have mortgage insurance. There are income restrictions, though.
Key Features:
- Qualified borrowers must meet eligibility requirements such as being owner-occupants and purchasing a home within a certain geographical area.
- Maximum income and loan amount limits apply. Minimum combined loan-to-value must be greater than or equal to 80%.
- Down Payment Grant program may be considered taxable income, a 1099-MISC will be issued, consult with your tax advisor.
- Certain property types are ineligible. Maximum loan-to-value (“LTV”) is 97%, and maximum combined LTV is 105%. For LTV >95%, any secondary financing must be from an approved Community Second Program.
4. Chase
A globally recognized company with financial knowledge and a strong customer service focus. Chase can be considered the top national mortgage lender, providing a wide range of home financing products that address various customers’ situations.
Key Features:
A broad portfolio of mortgage products includes, among others, FHA loans, VA loans, and conventional loans with low down payment options.
- Chase Homebuyer Grant offers up to $7,500 if you qualify in certain locations of the country.
- The money can be used to reduce interest rates, pay for Chase fees or other costs, and use the remaining amount to help with a down payment on eligible loans.
5. US Bank
With a proven track record, the US Bank has loan programs with affordable deposits that allow homeowners to take the right direction in their homeowner’s journey.
Key Features:
- An array of mortgage products that encompass, among other options, FHA loans, VA loans, and conventional loans with low down payments.
- Smooth digital platforms and portals for easy submissions and document management.
- Responsible lending practices
Read also: The Documents Needed For Mortgage Pre-approval
FAQs
Q: Which type of mortgage has the lowest down payment?
Normally, Federal Housing Administration (FHA) loans will have the lowest down payment requirement, ranging from around 3.5% of the purchase price.
Q: Which bank is offering the lowest mortgage rates now?
A: Mortgage rates may change depending on several factors, such as the lender, the borrower’s credit score, and the market situation. The best thing to do in this situation is to look at quotations from different lenders and choose the deal that is most suitable for you.
Q: What’s the easiest mortgage lender?
A: Different lenders will have different requirements and processes, and so what might be easy for one borrower could be more difficult for another. Online lenders and credit unions are widely known for their applications and user-friendly interfaces.
Q: What is a low-down payment?
A low-down-payment is referred to as the amount of real money that a borrower will pay upfront while purchasing a home. Generally, a low-down payment is defined as a value less than 20% of the purchase price. Some loan programs might offer a down payment as low as 3% or even 0% for qualified borrowers.
Conclusion
If you’re finding it hard to save enough for a down payment on a house, you’ll be happy to know there are several low-down-payment mortgage programs available in the US.
When you choose to apply with one of the best lenders, they will help you find a deal that meets your requirements and takes you one step further toward home ownership.
Don’t let your lack of savings stop you from pursuing your dreams; check out these low-down payments today and start walking the path of home ownership.
