{"id":15236,"date":"2020-03-27T09:43:02","date_gmt":"2020-03-27T16:43:02","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=15236"},"modified":"2026-01-02T15:21:21","modified_gmt":"2026-01-02T23:21:21","slug":"buyer-low-down-payment","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-low-down-payment\/","title":{"rendered":"How to Find a Low Down Payment Option That Works for You"},"content":{"rendered":"

Many would-be homebuyers become overwhelmed at the thought of saving up 20% to put down on a home (that\u2019s $40,000 on a $200,000 home \u2014 not including closing costs<\/a>.) Although a 20% down payment has become the gold standard, it\u2019s pretty rare for buyers to come to the table with 20% down. In fact, the National Association of Realtors reports<\/a> that in 2019, first-time buyers who financed their home typically financed 94% with a 6% down payment, while repeat buyers financed at 84% with a 16% down payment.<\/p>\n

\u201cThe current minimum down is 3%, often limited to first-time buyers with income limits,\u201d says Lou Barnes<\/a>, a Senior Mortgage Loan Officer with Premier Mortgage Group who has over 30 years of experience in the industry. “But 5% down is available to anyone.”<\/p>\n

Let\u2019s take a look at some of the low-down-payment loans available so that you can find a low-money-down option that works for you.<\/p>\n

One note:<\/strong><\/em> Lenders have been increasing loan standards by imposing mortgage loan overlays<\/a> in the wake of the coronavirus pandemic, additional standards above and beyond those required by the government. Although these are the minimum down payment requirements outlined in the various programs mentioned, individual lenders can and do require higher credit scores or bigger down payments<\/a> when the loan environment is riskier. Talk to your real estate agent and your loan officer about your options right now.<\/p>\n

\"The<\/a>
Source: (Curtis Adams \/ Pexels)<\/figcaption><\/figure>\n

Why do you need a down payment?<\/h2>\n

As a homebuyer, you may be wondering what the point of a down payment<\/a> is, anyway. \u201cThere are a couple of reasons lenders require a down payment,\u201d says Melanie Hunt<\/a>, a top-selling real estate agent in Fort Worth, Texas. \u201cThe lender wants to know that you can save<\/a>, because having savings is important in terms of the fact that you\u2019ll be able to keep the house. You used to be required to have four months of house payments in savings to close on a loan because lenders want to know that you\u2019ve learned to commit money to the house and you\u2019ve got skin in the game,\u201d Hunt explains.<\/p>\n

When the Great Recession hit the Fort Worth area in 2008, buyers who bought with no money down were the first to walk away from their homes. \u201cThey had no skin in it; They didn\u2019t lose $10,000 or $15,000,\u201d Hunt says.<\/p>\n

A down payment then, is an assurance for the lender that the buyer will me more likely to do everything possible to protect their investment.<\/p>\n

What happens if you can\u2019t put 20% down?<\/h2>\n

\u201cAs the down payment falls below 20% toward zero, all loan types have add-on costs to cover larger rates of default and foreclosure,\u201d says Barnes.<\/p>\n

\u201cFHA loans require a Mortgage Insurance Premium, MIP, a one-time lump-sum financed by FHA, and<\/i> a monthly fee.\u201d<\/p><\/blockquote>\n

On a conventional loan, says Barnes, you\u2019ll likely have to pay private mortgage insurance (PMI)<\/a> when you put down less than 20%. PMI is an insurance policy that compensates lenders in case you default on your loan. PMI will typically cost you about 0.5% to 1% of the total loan costs, so on a $200,000 mortgage you could end up paying as much as $2,000 per year in PMI.<\/p>\n

The good news, says Barnes, is that \u201cbecause of low defaults, the cost of PMI is the lowest in its history.\u201d<\/p>\n

You can get rid of PMI with some loans once you\u2019ve accrued enough equity, but if you don\u2019t have at least a 10% down payment, you could end up paying PMI for the lifetime of the loan unless you refinance.<\/p>\n