The first low down payment option is an FHA loan because approved borrowers can have a down payment for as little as 3.5%. You don’t have to be a first-time homebuyer to qualify for this loan and you can refinance or purchase a primary residence for a loan amount that can exceed $900,000 in high-end areas. A big negative about this loan is the mortgage insurance premiums. Less than a 10% down payment requires MI insurance for the entirety of the loan, and it continues if you don’t sell your home, pay the full balance, or refinance into a conventional loan.
Another option is the USDA loan which can allow you to get loans of up to 100% of your purchase price. USDA loans are for low-to-moderate income borrowers that are looking for property in rural areas, and they are backed by the Department of Agriculture. You have to meet certain requirements to qualify for this loan, so check your eligibility before applying. Premiums for this loan are usually 1% of the loan upfront and added to your loan balance. There is also an annual premium of 0.35% of the loan balance, but as you pay off the loan, this annual premium reduces.
A third option is the VA loan that is available for veterans, active service men and women, and reservists. Service members can be eligible through the Department of Veteran Affairs to receive up to 100% financing with no monthly MI premiums. A one-time funding fee is collected when the loan closes based on the veteran’s down payment and eligibility, and it varies from 1.25% to 3.3%.