The dream of homeownership often comes with the challenge of saving for a sizable down payment. Fortunately, there are various lending programs designed to help prospective buyers purchase a home with less than the traditional 20% down payment. In this blog post, we'll explore some of these programs, making homeownership more accessible to a broader range of individuals and families.

1. FHA Loans: Affordable Entry to Homeownership

The Federal Housing Administration (FHA) offers loans with a down payment requirement as low as 3.5% of the purchase price. FHA loans are popular among first-time homebuyers due to their lenient credit requirements and accessible down payment options. These loans are insured by the government, making them more attainable for those with less-than-perfect credit.

2. VA Loans: Exclusive Benefits for Veterans

For eligible veterans and active-duty service members, the U.S. Department of Veterans Affairs (VA) provides VA loans with no down payment required. This incredible benefit allows veterans and their families to achieve homeownership without the financial burden of a down payment. VA loans also offer competitive interest rates and more flexible qualification standards.

3. USDA Loans: Rural Homeownership Opportunities

The U.S. Department of Agriculture (USDA) offers USDA loans that require no down payment for eligible rural and suburban homebuyers. These loans are designed to promote homeownership in less densely populated areas. USDA loans typically have favorable terms and competitive interest rates.

4. Conventional Loans with Private Mortgage Insurance (PMI)

Conventional loans, not backed by government agencies like FHA or VA, can still be obtained with less than 20% down payment. However, you'll likely be required to purchase Private Mortgage Insurance (PMI), which protects the lender in case of default. While PMI adds an additional cost to your monthly payments, it allows you to secure a conventional loan with as little as 3% or 5% down.

5. State and Local Assistance Programs

Many states and local governments offer assistance programs that provide down payment grants, loans, or subsidies to qualified homebuyers. These programs vary widely by location and eligibility criteria, so it's worth researching what's available in your area.

6. 80-10-10 or 80-15-5 Loans

These unconventional loan structures involve taking out two mortgages simultaneously. For example, with an 80-10-10 loan, you put down 10%, take out an 80% first mortgage, and obtain a second mortgage for the remaining 10%. This can help you avoid PMI and reach homeownership with less than 20% down.

These programs are not guaranteed to be offered and this information is not intended to be advice. This list is a place to start a conversation with your lender about your personal goals and financials.