90% of most home buyers often make use of mortgage loans while trying to buy a house. However, 80% of home buyers have a uniform belief system that before you can access a mortgage loan, a 20% downpayment is needed on average.

This subtle misconception has stopped many home buyers from becoming homeowners. A survey taken by Wells Fargo discovered that 44% of Adults in the US believe a 20% downpayment is required to be a homeowner.

However, contrary to widespread belief, the major mortgage loan types available today accept a downpayment of less than 5%. And what’s more intriguing is that these loans do not have strict eligibility criteria and you may be eligible for one.

Let’s see five types of low down payment mortgages and affordable home loans

Low Down Payment Mortgages and Affordable Home Loans

As a homebuyer, there are four major types of home loans available, and to access these loans you don’t need to have up to a 20% down payment. You’ll be surprised to find out some mortgages do not require any down payment.

The mortgage options available are usually USDA, FHA, VA, and Conventional loans. You’ll most likely find these options with every lender.

So, if you desire to buy a home with little or no down payment or you need an affordable home loan, then this article will help you to make the right choice based on your capacity.

FHA Loans

The FHA loan is government-backed. It is backed by the Federal Housing Administration in the US. The FHA loan allows you to access a mortgage loan with a 3.5% down payment. Compared to the 20% as believed, this gives a lot of potential home buyers an opportunity to access a mortgage loan and secure home. 

The Federal Housing Administration is not directly involved with loan issuance to home buyers. However, the FHA oversees the loan program and offers insurance to the private lenders who issue the loan. The FHA down payment rate is one of the lowest among affordable home loans.

If you are a first-time homebuyer, FHA is a great mortgage option. The mortgage acquisition standards attached to securing an FHA loan are friendly toward first-time homebuyers. The US government created the FHA loan in 1934. 

The purpose was to assist and make homeownership easy for the citizens. Especially those who do not have high credit scores and are unable to qualify for other loan programs. With a minimum credit score of 580, you can access the FHA loan.

Conventional Loans

Conventional loans are of two types, conforming loans, and non-conforming loans. The difference between these loan types is that the former conforms with the loan guidelines of Freddie Mac and Fannie Mae. While the latter does not conform with these guidelines.

Conventional loans are also one of the available mortgages with a low down payment. However, conventional loans are accessible to home buyers with higher credit scores, but only a 3% downpayment is required.

With a conventional loan, one of the added advantages available is the option to cancel private mortgage insurance. Unlike FHA loans which require mortgage insurance payment through the loan duration. When your home equity reaches 20%, conventional loans allow you to remove the mortgage insurance.

HomeReady Loan

The HomeReady loan belongs to the family of conventional loans as well. It also offers loan access to home buyers with only a 3% down payment. This HomeReady mortgage was designed to offer assistance to multi-generational households for mortgage financing approval. It is a type of conforming loan and it is backed by Fannie Mae.

The HomeReady loan is available with 98% of home lenders in the US. This loan also offers you a below-market mortgage insurance cost.

Furthermore, to qualify for the HomeReady loan, you can use many non-traditional income types. This includes rental income from a relative, roommate income, and also from a household member.

USDA Loans

Like the FHA loan, the USDA loan is also backed by the US government. The United States Department of Agriculture oversees the USDA loan conditions and offers insurance to loan lenders. However, unlike the FHA, the USDA loan offers a 0% down payment requirement for loan access. 

The USDA loan types give access to affordable home loans for homebuyers in less dense suburban and labeled rural areas. The USDA loan program was developed with the purpose to spur economic activity and homeownership in labeled rural areas. One of the eligibility criteria for the USDA loan is that your income must be less than 115% of the area’s median income.

The USDA loan is one of the most affordable home loans available. The interest rate offered is also lower compared to conventional loans. And, monthly payments are easily affordable as well. In addition, you don’t need a high credit score to access the USDA loan. 

VA Loans

The VA loans also belong to the category of affordable home loans. Like the USDA loan, the VA loan is also a government-backed mortgage. It is backed by the US Department of Veterans Affairs. The US DVA also does not issue loans directly to Homebuyers. Instead, they insure VA loans and give eligible Homebuyers access to a home loan with zero down payments.

The VA loan program is not available to every homebuyer. Only members of the US military are retired service members or their surviving spouses. The VA loan rates are the lowest compared to other low or no down payment mortgage loan options. It is one of the best mortgage loan options but it’s not available for everyone. Eligible veterans will never have to pay mortgage insurance.

So, active and honorably discharged service members are eligible for the loan program and enjoy all its benefits. In addition, home buyers who have spent a minimum of 6 years in the National Guard or Reserves and spouses of service members killed in the line of duty are also eligible.


As opposed to the 20% down payment mortgage loan restrictions, you can easily access affordable home loans with little or no down payment. 

FHA loans offer mortgages with a 3.5% down payment, Conventional and HomeReady Loan offer 3%, while USDA and VA offer loans with zero down payment. You can decide to opt for any of these affordable home loans if you are eligible. 


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