Best No or Low Down Payment Mortgage Lenders

Top10.com StaffByTop10.com StaffJul. 18, 2019
Calculate the costs of a no down payment mortgage
You’ve had enough of paying rent and the dream of having the keys to your own home gets stronger every day. But how do you get moving in the right direction when you don’t have the funds to put together a down payment? You’re by no means alone in this conundrum, and low or no down payment mortgages are tailor-made for people having trouble getting together that first investment.

Top Picks: Low or No Down Payment Lenders

1. LendingTree

Best for: comparing many lenders at a glance

Since 1998, tens of millions of people have used LendingTree to find online loans, including personal loans, mortgages, and mortgage refinance loans. The website is built to be easy to use and within minutes you can compare loans from a wide variety of lenders. With the lenders competing for your business, you should have a better chance of getting a loan that works with your budget. 

Minimum down payment: 0% for some loan types

Minimum credit score: 500 (with 10% down payments)

Pros 

  • Check your credit score and how it affects your offers 
  • Fill out one form to get multiple offers  
  • Get loan offers within minutes 

Cons 

  • Dealing with lots of lenders vying for your business 
  • Rates shown after entering Social Security numbers

The company doesn’t charge any fees for connecting you with lenders, and can provide you with free credit scoring. 

If you aren’t able to pay much of a down payment, you can still find a loan with LendingTree, which is known for helping people with less than ideal credit find loans. Keep in mind though, that with a lower down payment, you’ll have a higher principal to pay off. 

LendingTree LendingTree View Rates

2. Quicken Loans

Best for: Calculating your budget and monthly payments

Quicken Loans provides a large variety of loans from fixed and ARM mortgages to reverse mortgages and more. The company can accommodate VA and USDA mortgages, which have no down payments within certain requirements, as well as home refinancing.Quicken can provide home mortgages for up to $3 million, so chances are that you can find a mortgage that can cover your dream house.Quicken can provide you with a 3% down payment loan, and the application process is all online and all easy. What’s perhaps most appealing is the sheer volume of loan options, though this could also be confusing to a first time home owner.

Minimum down payment: 0% on VA loans, 3.5% on FHA loans, 3% on some conventional loans

Minimum credit score:  500 on FHA loans with a 10% down payment, 580 on FHA loans with 3.5% down, 620 on some conventional loans

Pros

  • Wide variety of loan options
  • Fast application process
  • Many options for people who want to make a low down payment

Cons

  • No 24/7 live chat
  • No FAQ section

Quicken Loans Quicken Loans View Rates

3. Rocket Mortgage

Best for: FHA loans with no pre-payment penalties

Rocket Mortgage is an all online platform meant for making mortgages easy to understand and navigate, even from your phone. The company can underwrite low or zero down payment loans such as VA and FHA loans, and can also secure 5- or 7-year ARM and 15- or 30-year mortgages. The company can handle a variety of mortgage plans and credit histories.Rocket Mortgage also has a handy live chat customer service option, as well as phone support if you need any assistance.

Minimum down payment: 3% on some conventional loans, 0% on VA loans, 3.5 % on FHA loans

Minimum credit score:  500 on FHA loans with a 10% down payment, 580 on FHA loans with 3.5% down, 620 on some conventional loans

Pros

  • Live chat and other extensive customer service options
  • Down payments as low as 1% can be accommodated
  • Loan offers can be given within minutes
  • All online platform that’s simple to use

Cons

  • You need to submit extensive financial information to get quotes
  • Rocket Mortgage only supplies information on rates once you have uploaded your financial information to the company site.

Rocket Mortgage Rocket Mortgage View Rates

4. J.G Wentworth

 Best for: National loan programs and financial assistance for first-time buyers

For more than two decades, J.G Wentworth has helped customers obtain financing for a variety of fixed and adjustable rate mortgages. The company can help facilitate zero or low down payment loans by underwriting VA loans, FHA loans, and USDA loans, and does so through a simple online application backed by stellar customer service.  

Minimum down payment: 0% on VA and USDA loans, 3.5% on FHA loans

Minimum credit score: 500 on FHA loans with a 10% down payment, 580 on FHA loans with a 3.5% down payment

Pros

  • Underwrites VA, FHA, and USDA loans
  • Simple online application
  • Variety of fixed and adjustable rate mortgages (fixed rate for 15-, 20-, or 30-year terms, and adjustable mortgages for 5, 7, and 10 years)

Cons

  • No live chat support
  • Not available in all states
  • Information on the company website is sparse

The J.G. Wentworth website does not include a chart showing specific rates, but it does have a calculator that you can use to figure out what type of loan they can supply and if you meet the requirements. 

J.G. Wentworth J.G. Wentworth View Rates

5. NBKC

NBKC has a wide variety of options for refinancing and home mortgages—including for people who can’t put much money down. 

Minimum down payment: 3.5%

Minimum credit score: 580

Pros

  • Excellent customer service ratings 
  • Wide range of repayment terms, VA and FHA loans 
  • Transparent pricing

Cons

  • No 24 hour live chat 
  • Flat fee for mortgage origination of several hundreds of dollars.

NBKC is best for borrowers with credit scores of at least 630, though other borrowers, including military veterans, may be less restricted by their credit score. With NBKC you find 10-, 15-, 20-, and 30-year fixed rate mortgages, as well as 3-, 5-, or 7-year ARM mortgages, as well as FHA mortgages and VA loans. 

The entire application process can be performed online or on the phone, and you’ll have your own personal loan officer to help you through the process. One drawback though—the company doesn’t offer a 24/7 customer service chat option, and phone support is only available during business hours. 

View Rates

What Is a Down Payment, and How Does It Work?

A down payment is the part of the home purchase price that you don't take a loan for--you pay that portion, generally ranging from 0%-30%, upfront at the time of purchase.Take your standard 10% down payment, for a $300,000 house. This requires paying $30,000 up front and financing the rest. Over the term of a 30-year fixed mortgage with 4% interest, you would have a monthly mortgage payment of $1,788.One thing to keep in mind is that the higher the down payment, the lower the monthly payment over the term of the loan. You may also qualify for a lower interest rate with a higher down payment.For instance, if you put down 20% on that same $300,000 house, your monthly payment would be $1,558. Conversely, if you put down zero, your payment would be higher -  $2,145 per month.  You may be required to have a higher credit score and pay Private Mortgage Insurance in order to qualify for a low down payment loan, which can exclude some borrowers and add to the costs. 

What Is a No Down Payment Mortgage?

Low or zero down payment mortgages are mortgages with a down payment of 0-5%, but they often require you to have good credit and the income to make the monthly payments. You may also be required to pay for private mortgage insurance.

Many enter adulthood assuming that if they want a house, they’re going to need a hefty down payment. But while paying a 20% down payment is a great way to secure affordable monthly payments, it’s by no means a requirement. In fact, only 45% of home buyers pay 20% or more down, and 60% of first-time home buyers only put down 6% or less before they get in the door and start arranging the furniture.

Types of Low Down Payment Loans

Loan Type
Down Payment
Credit Score
Other Costs
FHA
3.5%
580
Mortgage insurance (1.3% upfront, .85% annually)
VA
0%
620
Funding fee (2.15%)
USDA
0%
640
Lender fees, closing costs
Conventional
3%
620
Private mortgage insurance (around 1%)

How Can You Buy a House with No Down Payment?

There are a number of US government programs that can assist new home buyers, and it's worth taking a look to see if they can work for you and if you fit the requirements.

  • Federal Housing Administration (FHA) loan

These loans are insured by the FHA and allow first time homebuyers to take mortgages with down payments of 3.5% if you have a credit score of 580 or higher. Because of the perceived higher risk, you will be required to pay mortgage insurance with an FHA loan. This is typically 1.75% of the loan amount upfront plus .85 percent annually (paid monthly). For a $300,000 mortgage this would be $5,250 up front plus monthly payments of $212.50.

  • Veterans Affairs Home Loan

VA home loans, for current or former military personnel, allow you to finance 100% of the cost of the house with zero down payment. There is also no monthly mortgage insurance, but most VA loan recipients will be required to pay a funding fee of 2.15% if you put zero down. And while VA home loans tend to be more lenient about credit, your credit score can affect your interest rate.

  • USDA loan

The United States Department of Agriculture (USDA) offers low-interest, fixed-rate loans for single family housing in rural areas. These loans do not require a down payment, interest can be as low as 1%, and you can sign up for a payback period as long as 38 years. That said, you do have to meet a number of requirements, including that you are currently without “decent, safe and sanitary housing,” and that you’re looking to buy in a rural area with 35,000 residents or less.

  • Conventional loan (Conventional 97)

These are loans that are financed up to 97% as long as you have credit of 620 or higher. They are not funded through the government and typically while they have a slightly higher interest rate this is offset by the lower down payment.Other types of loans that can get you into a new home without requiring a large down payment include My Community, Home Ready, Piggyback Loans, and HomePath Ready Buyer. Like the other low down payment loans on our chart, your credit history and financial standing can affect your likelihood of receiving a loan. You also may be required to buy private mortgage insurance.

Pros and Cons of a Low or No Down Payment Mortgage

Pros
Cons
Don't have to save as much for a down payment
Higher interest rate
Get into a house quicker and stop paying rent
higher monthly payment
Cash reserves stay liquid in case of emergencies
High closing costs and possible PMI

What is Private Mortgage Insurance?

If you're making a down payment of less than 20 percent, the lender will see you as a higher risk borrower, and most likely require you to purchase private mortgage insurance (PMI). This is a security measure the lender puts in place to protect them in case you end up defaulting on the loan.The fees vary for PMI, but it can be a significant expense for a borrower. The cost can range from about .3 to 1.5 percent of the original loan amount annually, though your credit score can affect this.How does this play out? Let's say you have a $300,000 mortgage and PMI set at 1%. This comes out to $3,000 per year, or an extra $250 per month on top of your loan payment. On the one hand, this is a significant expense to tack on each month, at the same time, it helps all types of people secure mortgages when otherwise they may have been seen as too high risk.

Why Sign up for a No or Low Down Payment Mortgage?

The answer to this may be familiar - it allows you to get a mortgage without having to first save up the money necessary for a large down payment. The down payment is often the biggest unfinanced, out of pocket expense people make in their lives, and if your expenses are high, it can be difficult to put enough away every month to save up for a 20% or even 10% mortgage.

  • Buy sooner: If you don't have to save up for a down payment it means you can sign a mortgage that much sooner, allowing you to take advantage of  today's friendly interest rates and a hot real estate market with prices and rates that have been steadily increasing. By the time you manage to save up for a down payment, they may be even higher than the rates you'll receive now for your low down payment mortgage.
  • Save your resources: It can take creativity to get a down payment together. This can mean borrowing money from family or friends, or cashing out a retirement fund or a stock portfolio - none of which are ideal because they can drain your emergency resources. It’s wise to have money stored away in a rainy day fund, and if you put all that money down on a house, you won’t have those liquid funds to count on if the need arises.

The Cons of a No Down Payment Mortgage

If you’re not putting money down, a lender may see you as a high-risk borrower and require that you secure mortgage insurance, which can be a significant monthly expense. In addition, with a low or zero down payment, your mortgage will probably come with a higher interest rate that can add up over the lifetime of the loan.Origination fees and closing costs can also be higher, and all of these factors can be affected by your credit score.If you don't put any money down, the amount you finance will be higher. This will translate to a higher monthly mortgage payment. In addition, since you didn’t put any money down, you will have zero equity at the beginning of the loan, and it will take you longer to accrue it and make you more susceptible to downturns in the housing market.

So, Should You Take a No Down Payment Mortgage?

A zero or low down payment mortgage can be a great option for borrowers who are looking to finally get into a house of their own, but are having trouble putting together the funds needed to make it happen. These loans can come with higher interest, fees, and require the purchase of mortgage insurance, but for those of us who are having trouble jumping that first (and very big) hurdle to home ownership, a low down payment loan can make it all come together.

Top10.com StaffByTop10.com StaffJun. 18, 2019
Our editorial staff is comprised of writers who are knowledgeable about financial services. We specialize in simplifying the process of choosing the right mortgage lender for your needs.