Qualifying
How do I buy a house with a low down payment?
Several loan programs let qualified buyers purchase a home with 3% to 3.5% down — or even 0% for eligible veterans and rural buyers. The trade-off is typically mortgage insurance or a funding fee, which adds to the monthly cost. Combining a low-down-payment program with down payment assistance can reduce the cash required at closing even further.
The full picture
A 20% down payment is not a requirement to buy a home — it is simply the threshold that eliminates private mortgage insurance (PMI) on conventional loans. The CFPB's homebuying guide outlines loan programs that go as low as 3% down for conventional loans and 3.5% for FHA loans, with VA and USDA loans offering zero-down options for eligible borrowers.
Low-down-payment loan programs
- Conventional 97 (3% down): Available through Fannie Mae and Freddie Mac for first-time buyers with a credit score of at least 620. Requires PMI until your equity reaches 20%.
- FHA loan (3.5% down): Backed by HUD; credit score minimum is 580 for 3.5% down, or 500-579 with 10% down. Requires both an upfront mortgage insurance premium (MIP) and an annual MIP for the life of the loan if you put less than 10% down.
- VA loan (0% down): Available to eligible veterans, active-duty service members, and some surviving spouses. No PMI, but a one-time VA funding fee applies. See VA loan eligibility at benefits.va.gov.
- USDA loan (0% down): For eligible buyers in qualifying rural and suburban areas. Income limits apply. See the USDA loan overview at hud.gov.
- State & local down payment assistance (DPA): Many state housing finance agencies offer forgivable grants or second mortgages for first-time buyers. Search your state's program at hud.gov/topics/buying_a_home.
The true cost of a small down payment
Putting less than 20% down means you will carry mortgage insurance, which adds to your monthly payment. On an FHA loan, the annual MIP rate depends on your loan amount, term, and LTV — check the current schedule at hud.gov. On a conventional loan, PMI cost varies by lender but typically runs 0.5%–1.5% of the loan amount annually. Once your equity reaches 20% on a conventional loan, you can request PMI removal under the Homeowners Protection Act; FHA MIP rules differ depending on when your loan originated.
What lenders look at beyond the down payment
- Credit score: 620 minimum for conventional; 580 for FHA at 3.5% down.
- DTI ratio: Generally 43% or below for most programs; FHA allows up to 50% with compensating factors.
- Stable income: Two years of employment history is the standard benchmark.
- Reserves: Some lenders require 2-3 months of mortgage payments in savings after closing.
Low-down-payment program facts
- FHA-insured loans require a minimum 3.5% down payment for borrowers with a credit score of 580 or higher. — HUD — FHA Loan Requirements
- Fannie Mae and Freddie Mac conventional 97 programs allow a 3% down payment for first-time homebuyers meeting credit and income guidelines. — CFPB — Conventional loans
- The FHFA conforming loan limit for 2025 is $806,500 for a single-unit property in most areas — low-down-payment conventional programs apply only up to that limit. — FHFA — Conforming Loan Limits
Key takeaways
- FHA (3.5% down) and conventional 97 (3% down) are the most accessible low-down-payment options for buyers with credit scores above 580-620.
- VA and USDA loans offer zero-down options but have eligibility restrictions — check your status before assuming you don't qualify.
- Mortgage insurance adds meaningful monthly cost; model the full payment — principal, interest, taxes, insurance, and PMI — not just the rate.
- State down payment assistance programs can cut your out-of-pocket cash significantly; search your state's HFA program at hud.gov.
- Putting less than 20% down is a legitimate strategy, not a last resort — just price the insurance cost into your total borrowing decision.
Published 2026-05-22 · Updated 2026-05-22 · https://clearvaluelending.com/answers/how-to-buy-a-house-with-a-low-down-payment