How to Buy a Home Without a 20% Down Payment

Buying a home is a massive milestone for many people, and it’s one you should be able to achieve. We understand that between closing costs and a 20% down payment, it’s a significant investment, and sometimes, no matter how much you save, it won’t be enough. Especially now that the median sales price has almost increased by 50%! But we’re here to reassure you that you can still buy a home without a 20% down payment, and here’s how. 

How Much Should I Have for a Down Payment?

Due to the competitive and seller’s real estate market we’re in now, home mortgage interest rates have dropped to new historical lows. This means if you’re thinking of buying a home, do it now with a low mortgage interest rate! Thanks to the intense demand for homes, lenders and banks still offer loan programs with minimal down payment requirements. They typically range from 3% to 10%, and some don’t require a down payment at all! A low mortgage rate will help you lock in a great deal for a long time and save you money. 


How much you put down will depend on your mortgage lender and the terms you agree on. That’s why you must research several options before choosing the right lender for you. Most government-backed Federal Housing Administration loans allow down payments as low as 3.5%. But it does require mortgage insurance, which can cost you more money in the long term. Mortgage insurance protects the lender and is a monthly payment for the entirety of the loan. Most private loans will require mortgage insurance, too, if the down payment is under 20%. Freddie Mac estimates mortgage insurance to cost $30-$70 per month for every $100,000 borrowed. 


How Do I Receive a Low Down Payment Loan?

The top qualifiers for receiving a low down payment are a high credit score and cash in the bank. A downpayment is only one risk factor taken into consideration by a lender. The other factors are existing debt, credit history, and cash reserves. To offset the risk of a low down payment, higher credit scores, more cash, and a low debt-to-income ratio would offset the risk. So if you can prove to the lender you aren’t a risk, you’ll have a better chance at qualifying. 


According to FICO, the average American’s credit score is 706, and one lender program with little or no down payment requires a 720 credit score. Most FHA loans require a credit score of 580 to qualify for the minimum 3.5% down payment. The score requirement will vary with what lender you choose to work with. Again, that’s why it’s essential to do your research beforehand! 

Is There Down Payment Assistance?

The other alternative to a low down payment is a down payment assistance program. The programs can help cover most or all of a qualifying buyer’s down payment. It usually comes in the form of a grant or loan. A down payment assistance program will really help home buyers wanting to compete in this fast-moving and low inventory real estate market since it will help with closing costs. By helping with closing costs, buyers have the opportunity to make better offers to sellers. 


No matter what percentage you have saved or still need to save, you can buy a home without having to put down a 20% down payment. If you’re ready to buy today, contact us! Reach out to us anytime at or (512) 828-7074.

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