Twenty percent down is the number most people carry around in their heads, and it’s the single biggest reason would-be buyers never call a lender. The reality is friendlier than the myth. The median down payment for first-time buyers has hovered around 8% for years, and a decent share of buyers put down 5% or less. Some put down nothing at all.
The right program for you comes down to three variables: your credit score, your household income, and whether you or your spouse served in the military. Sort those out and you can often keep your total cash outlay under $15,000 on a $300,000 house. If you want the whole menu in one place first, this guide to low down payment mortgage options from 3% down to zero down lays out the spectrum.
Conventional Loans With Just 3% Down
Fannie Mae and Freddie Mac both back 3%-down conventional loans. Fannie’s version is Conventional 97; Freddie’s is HomeOne. Fannie’s HomeReady and Freddie’s Home Possible also allow 3% down, and they come with slightly better pricing if your household income is at or below 80% of your area’s median.
The trade-off is credit. You’ll generally need a 620 score at minimum, and the best rates start north of 740. Conventional loans also let you buy with higher income than many government programs allow, and the mortgage insurance is cancelable.
What private mortgage insurance really costs
PMI on a 3%-down loan typically runs 0.3% to 1.5% of the loan amount per year. On a $291,000 loan (a $300,000 purchase with 3% down), a 0.6% rate works out to about $145 a month. You can request removal once you hit 20% equity, and it falls off automatically at 78% loan-to-value based on your original amortization schedule.
FHA Loans: 3.5% Down With Forgiving Credit Standards
FHA is the workhorse of low down payment lending. A 580 credit score gets you in at 3.5% down. Scores between 500 and 579 are still eligible, but you’ll need 10% down. FHA also allows higher debt-to-income ratios than most conventional programs, which matters if you’re carrying student loans or a car payment.
The cost is mortgage insurance that sticks around. You pay an upfront premium of 1.75% of the loan (usually rolled into the balance) plus an annual premium of roughly 0.55%. On a 30-year loan with less than 10% down, that annual premium stays for the life of the loan unless you refinance into a conventional mortgage later.
FHA loan limits for 2025 start at $524,225 in low-cost areas and reach $1,209,750 in expensive ones, so the program works in most markets. Sellers can contribute up to 6% toward your closing costs. If your score sits in the 580 to 639 range, mortgage options for a 580 credit score are worth reading before you apply anywhere.
VA Loans: Zero Down and No Monthly Mortgage Insurance
If you’re a veteran, active-duty service member, or surviving spouse, a VA loan is almost always the strongest option available. Zero down payment. No monthly mortgage insurance. Competitive rates because the government guarantees part of the loan. The only upfront cost is a funding fee of 2.15% for first-time use with less than 5% down, and most buyers finance that into the loan.
Credit standards are softer than conventional, with many lenders approving at 620 and some at 580. There are other zero-down routes worth comparing, including USDA and stacked FHA programs, which is what this breakdown of mortgage types for buyers with no down payment walks through step by step.
USDA Loans for Rural and Small-Town Buyers
USDA loans get overlooked constantly. Zero down, no monthly mortgage insurance, and rates that compete with VA. Instead of PMI you pay a 1% upfront guarantee fee and 0.35% annually, a fraction of what FHA charges over the same 30 years.
The catch is geography and income. The property has to sit in an eligible rural area, which includes plenty of suburbs with populations under 35,000. Household income generally needs to stay under 115% of the area median, with higher limits in some high-cost counties. If you’re looking at a small town or the outskirts of a mid-sized metro, check the eligibility map before you rule it out.
Down Payment Assistance Can Stack on Top
State housing finance agencies and local nonprofits offer second mortgages, forgivable grants, and matched savings programs that cover part or all of your down payment and closing costs. Colorado, California, Texas, and Florida all run programs with income limits generous enough to catch middle-income households.
Pairing a 3% conventional loan with a down payment assistance second can get you into a house with almost no cash out of pocket. There’s a catch: the second loan carries its own rate and payment, and some are forgivable only if you stay in the home for a set number of years. Buyers on tighter budgets should read up on mortgage options for low-income buyers before assuming they’re priced out.
Which Loan Fits Your Situation
- Credit 740+, income under the area limit: HomeReady or Home Possible at 3% down. Best pricing of the group.
- Credit 620 to 739: Conventional 97 or FHA. Run both. FHA wins on rate more often than people expect when credit is mid-range.
- Credit 580 to 619: FHA at 3.5%. Most conventional lenders will turn you down.
- Veteran or active duty: VA, every time, unless a seller refuses to work with VA appraisals.
- Rural property, income under the cap: USDA. The 0.35% annual fee beats FHA’s 0.55% substantially.
The Costs That Surprise Low Down Payment Buyers
The down payment is rarely the biggest line item. Closing costs run 2% to 6% of the purchase price, which on a $300,000 home means $6,000 to $18,000. Add an appraisal at $500 to $700, a home inspection at $400 to $800, prepaid taxes and insurance, and a moving truck, and the cash needed to close can exceed a 3% down payment itself.
Lenders also want to see reserves, usually two months of mortgage payments left in the bank after closing. If your savings are thin, seller concessions and lender credits are your levers. What first-time buyers actually pay for different loan types is worth reading before you set a budget.
Ask for the Five-Year Cost, Not Just the Monthly Payment
Every lender hands you a Loan Estimate within three business days of your application. Put two or three side by side and compare the same three numbers: the total monthly payment including taxes, insurance, HOA dues, and mortgage insurance; the cash to close; and the total interest plus mortgage insurance paid over five years.
That last figure is where low down payment loans separate from each other. A conventional loan with PMI that drops off in year four can beat an FHA loan carrying mortgage insurance for 30 years, even when FHA’s rate looks lower on paper. A VA loan with zero monthly mortgage insurance usually beats both. Run the numbers on the house you actually want, at the price you’ll actually pay, and let the five-year total pick the loan for you.