Click To See Today's Rates

Posted 05/06/2013

Mortgage Options When You Have Less Than 20% Downpayment


Today's home buyers have a bevy of mortgage programs requiring less than 20% down The housing market is in recovery. Home prices are rising, "pocket listings" are back, and buyers find themselves with diminishing negotiation leverage over today's home sellers.

As we approach 2013's mid-point and head toward 2014, finding great deals in housing is going to get tough.

73% Of Buyers Put Less Than 20% Down

According to data from the National Association of REALTORSĀ®, 73% of U.S. home buyers made a downpayment of 20 percent of less in 2012.

This high percentage of "low downpayment" buyers is the result of several factors including a rush of first-time home buyers, who traditionally don't have the savings to make a twenty-percent downpayment; and, the housing downturn of last decade, which left many "move-up" buyers without sufficient home equity to make a subsequent large downpayment.

Thankfully, as the economy has expanded, so have options for low-downpayment mortgages.

There are more than a half-dozen such programs, some of which I outlined in an article written for Trulia entitled "4 Low Down Payment Loan Options Every Agent Should Know".

The post is broken down by desired downpayment, showing the available home loan options at each level.

Click to see today's rates (Dec 6th, 2016).

Low- and No-Downpayment Mortgage Options

The Trulia article highlights several well-known low- and no-downpayment mortgage options including the FHA mortgage as insured by the Federal Housing Administration; the VA mortgage as guaranteed by the Department of Veterans Affairs; and the conventional mortgage option with accompanying private mortgage insurance (PMI).

The piece also reviews several lesser-known, low-downpayment programs available to today's home buyers.

One such program -- theĀ Conventional 97 program -- is a Fannie Mae-backed mortgage which allows for 3% downpayments. This is even less than the FHA's required 3.5 percent downpayment requirement.

Furthermore, as compared to the FHA mortgage, theĀ Conventional 97 calls for a smaller mortgage insurance payment and requires no upfront mortgage insurance premium to be paid at closing.

Another highlighted program is the U.S. Department of Agriculture's (USDA) Rural Housing program. Available in many U.S. suburbs and exurbs, the Rural Housing mortgage allows for 100% financing with minimal annual mortgage insurance.

100% financing is not required via the USDA, but many home buyers opt for that route.

Click to see today's rates (Dec 6th, 2016).

Get Pre-Approved For A Low Downpayment Mortgage

For today's home buyers, a mortgage pre-approval may assist the home search. You'll know exactly how much home you can afford, and you'll know the mortgage options which remain available to you through the home-buying process.

You can also use this flowchart to determine which home loan is best for you.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

3 Testimonials

Ron Z. Real Estate Agent

I am a full-time Realtor and I look forward to daily updates from The Mortgage Reports. The advice is useful and the insight is important. Thank you!

Katrina B. Lab Technician

I look forward to reading The Mortgage Reports. Its information and updates helped me to buy my first home. Thank you!

Stefan J.

The Mortgage Reports is invaluable. It's our primary source for information on housing finance.

2016 Conforming, FHA, & VA Loan Limits

Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)