4 Special Loans That Allow You to Put Less Than 10 Percent Down on a House

published Sep 21, 2020
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Saving for a 20 percent down payment is synonymous with buying a home. It’s the traditional first step to take once you’ve decided to apply for a mortgage at some point in the future. 

It’s also a completely antiquated concept for most buyers.

With the myriad loan products on the market today, there’s a good chance you don’t have to put down even half that amount. Here are some of the best options for putting down less than 20 percent.

FHA Loan

The down payment requirement on an FHA loan is 3.5 percent for those with a credit score of 580 or higher. If you have a score between 500 and 579, you’ll have to make a 10 percent down payment.

Who Can Apply for It: Anyone who meets the credit score minimum and the debt-to-income ratio maximum (43 percent) is eligible for an FHA loan. Contrary to popular opinion, FHA loans are not restricted to first-home buyers. Even if you’ve already taken out an FHA mortgage, you can take out another one for your next home.

Restrictions: The total debt-to-income ratio, including the monthly mortgage payment, must be less than 43 percent. However, some lenders will allow a DTI as high as 50 percent.

Downsides: Mortgage insurance premiums (MIPs) may be higher than the Private Mortgage Insurance (PMI) that comes with conventional loans.

VA Loan

VA loans are available to both current and former members of the armed forces, including National Guard and Reserve members.

VA loans have no down payment and can be used multiple times. For example, if you take out a VA loan to buy a house and sell it in five years, you can buy your next home with a VA loan.

Who Can Apply for It: Members of the military who have a Certificate of Eligibility (COE) and surviving spouses of veterans who served a minimum amount of time can apply for VA loans.

Those outside of active military duty may also be eligible if they meet one of these requirements:

  • Served as a Public Health Service officer
  • Cadet at the United States Military, Air Force, or Coast Guard Academy or a Midshipman at the United States Naval Academy
  • Officer of the National Oceanic & Atmospheric Administration
  • Served with an allied country during World War II or as a merchant seaman during World War II

Restrictions: You still need good credit to qualify for a VA loan, usually a score of 620 or higher, and a debt-to-income ratio of 41 percent or less.

Downsides: Some sellers think that VA loans take longer to close, and it may be harder to get your offer approved.


USDA loans have no down payment requirement and are only available to those who buy a home in a designated rural area.

Who Can Apply for It: To see if your potential house is eligible, type in the address here. You need to have a credit score of 640 or higher, a debt-to-income ratio of 41 percent or less and have a salary that does not exceed the annual income limits.

Restrictions: Borrowers need to have low or moderate income levels to qualify.

Downsides: Only homes in rural areas are eligible.

Conventional Loan

Some borrowers think that all conventional lenders require a 20 percent down payment, but most will accept as little as 5 percent. Some may also allow a 3 percent down payment, but you’ll likely end up with higher interest rates. You also need to be a first-time homebuyer to put 3 percent down.

If you’re taking out an adjustable-rate mortgage, the minimum down payment is 5 percent.

Who Can Apply for It: Your credit score must be 620 or higher, and the debt-to-income ratio must be 50 percent or less.

Restrictions: The total loan amount must be less than the annual limit. In 2020, that was $510,400 for most parts of the country.

Downsides: A conventional lender generally has higher standards than other lenders.