Best Lenders for No- and Low-Down-Payment Mortgages in 2019

Low- and no-down-payment FAQs

What’s the catch with no- and low-down-payment home loans?

It depends on the type of loan you apply for. With FHA loans there can be geographic loan limits that put a cap on the price of the home you can buy. On HomeReady and Home Possible conventional loans, there can be income limits or a requirement that you are a first-time home buyer.

Other loan programs are available to borrowers in some low-income regions. There are local and regional low-down-payment mortgage programs, with various criteria needed to qualify.

» MORE: Check out first-time home buyer programs in your state

Do I have to be a first-time home buyer for a low- or no-down-payment mortgage?

Not always. For example, some low-down-payment loans are assisting buyers in economically disadvantaged areas, or catering to borrowers with military connections, such as with VA loans. USDA loans are looking to boost buyers in rural and suburban areas.

Some conventional loans, such as HomeReady and Home Possible, have income limits rather than first-time home buyer requirements — though the programs also have first-timer spinoffs.

» MORE: HomeReady and Home Possible allow 3% down

What’s the credit score required for a low- or no-down-payment mortgage?

To qualify for the lowest 3.5% down payment on an FHA loan, you’ll need at least a 580 credit score or better. With a score between 500 and 579, you’ll need a 10% down payment.

On conventional loans, a 620 or better is generally required.

For borrowers who have a military connection, VA loans don’t have credit score requirements — they’re based more on an applicant’s ability to repay the loan.

However, lenders often require a 620 FICO score even on VA loans and can add their own credit score and other qualifications, so it’s always a good idea to shop more than one lender.

» MORE: FHA loan credit score requirements

Are there income limits on low-down-payment home loans?

Sometimes but not always. In today’s “3% down is the new normal,” there is often a workaround. Income over the threshold? First-time buyers are excluded from such limitations. Same goes if you’re buying in a particular targeted area, or if you’re a military veteran.

Yet, just because you can put just a little down doesn’t always mean you should. If you have a really good income, consider your down payment options along with everything else such as how long you plan to stay in the home and what’s a comfortable monthly payment.

» MORE: What down payment is required?

Can I get a low- or no-down-payment home loan with bad credit?

Sure. Lenders are looking to make good loans. If you have the income and recent payment record that shows an ability and willingness to repay a loan, you can qualify — even with a checkered credit history.

But the setback that dinged your credit has to be in the past. If you’re still worrying about paying your bills paid on time, it’s best to wait on buying a house, no matter how tempting low down payments may be.

» MORE: How credit score affects your mortgage rate

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