The answer to this varies from applicant to applicant and from loan to loan. There are three main types of loan programs available:
USDA loans do not have any down payment requirements. They do however have income limits depending on the county that you buy and they are restricted to properties that have been designated “rural”. See our USDA section for more information on these loans.
FHA mortgages have the lowest required down payment at 3.5%. FHA loans also have upfront and monthly mortgage insurance. The underwriting guidelines for FHA loans are less restrictive than Conventional financing in most cases as well.
Conventional mortgages have a 5% down payment requirement – not much higher than FHA. While the guidelines for conventional financing are more restrictive than FHA, the benefits are that we can usually structure a conventional financing option that is less expensive than an FHA loan when you look at the monthly mortgage payment.
If you are a veteran or active duty and have earned your VA benefits, you could qualify for a VA home loan. These are hands down the best mortgages available for people that have little or no down payment. We are always surprised to hear from veterans that aren’t aware of the benefits of this loan program. You are able to borrow up to 100% of the purchase price of the home in most cases, and there is no monthly mortgage insurance. The one caveat to VA financing is that VA loans have a funding fee that the veteran can pay out of pocket or finance into the new mortgage.