When you are shopping for a home, coming up with a down payment can be a big hurdle. After all, the conventional wisdom that you’ll need to put down 20% can seem overwhelming. Luckily, there are several low money down loan types that could help you get into the home you are searching for. 

Are you looking for a low money down loan to help start your house hacking adventure? Don’t stop there. I encourage you to grab a copy of our free House Hacking Quick Start Guide. With this comprehensive tool in your back pocket, you’ll be ready to tackle anything house hacking throws your way. 

Let’s take a closer look at the low money down loan types available to help you kick start your journey. 

Is it possible to buy a home with a low down payment?

Yes. It is absolutely possible to buy a home with a low down payment. Although you can put down 20% for your home purchase, there are many loans that require a fraction of that amount. 

With fewer savings to build up, you can move forward with your home purchase sooner. 

However, it is important to keep in mind that you might be facing PMI when you go with a low down payment option. Typically, PMI or private mortgage insurance is attached to your monthly mortgage payment if you put down less than 20%. As you look for a home that fits your budget, keep this additional monthly expense in mind. 

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10 Types of low money down loans

Ready to uncover the types of low money down loans? Here are your options. 

FHA

With the FHA loan, you can put down as little as 3.5% on a home loan. FHA loans are backed by the Federal Housing Administration to provide homeownership opportunities for people with low to middle incomes. 

In order to qualify for an FHA loan, you’ll need to move into the property within 60 days of closing. Plus, the property itself must meet the standards set by the FHA. 

Although you can secure an FHA loan with as little as 3.5% down, your credit score will come into play. If you have a lower credit score, then you might be required to put down 10% on the property. 

VA

VA loans are backed by the U.S. Department of Veterans Affairs. In order to qualify for this loan, you’ll need to be an active-duty service member, member of the National Guard, a veteran, or the spouse of a veteran that died in the line of duty. You can find out if you are eligible for the loan by applying for a Certificate of Eligibility

In addition to your service, you’ll need to have a credit score of at least 640. 

If you qualify, then you could secure a home loan with 0% down. However, there will be a one-time funding fee that you’ll need to pay upfront. Although the funding fee can waive the mortgage insurance requirements, it may amount to a small chunk of change that you need to have ready for closing. 

USDA

USDA loans are backed by the U.S. Department of Agriculture. The purpose of USDA loans is to encourage homeownership in rural and suburban areas. With that, homes within certain areas will be ineligible. You can explore which areas are eligible with the USDA map

Importantly, the property cannot be a working farm. Instead, it must be a single-family home in which you intend to live as your primary residence. Beyond the property requirements, you’ll need to have a credit score of at least 640, a debt-to-income ratio of less than 45% and your household income cannot be more than 115% of the median income for the county. 

It is possible to get a USDA loan with zero money down if you qualify. 

Conventional loan with PMI

Contrary to popular belief, it is possible to get a conventional loan without putting 20% down. In fact, you can put down as little as 3% on a conventional loan. The disadvantage is that you’ll have to pay PMI – which can add to your monthly homeownership costs. 

NACA

The NACA, Neighborhood Assistance Corporation of America, is a non-profit that focuses on supporting homeownership in communities. As a part of their program, the NACA offers a mortgage for NACA members. 

The mortgage allows for no down payment, no closing costs, no fees, flexible credit requirements, and attractive interest rates. It could be a good option for the right borrower. 

Home Possible with Freddie Mac

A Home Possible loan is a flexible financing solution offered through Freddie Mac. The down payment requirement can be as low as 3% with the goal of servicing low and moderate income borrowers. 

The catch is that you cannot earn more than 100% of the median income for the area. 

Down payment assistance funds

Down payment assistance funds are grants designed to help potential homeowners that cannot save enough for a down payment. Check out this option with your situation in mind. You might be surprised to learn that you qualify for these grants. 

Physician loan

If you are a physician, then you may be able to take out a loan with a low down payment through select lenders. Although the details vary based on the lender, it could be a good option. 

Teacher loan

Teachers are another profession that can receive access to a low down payment loan. Look for opportunities from teacher-focused credit unions to find a good deal. You will find different terms with different lenders, but it can be a worthwhile opportunity. 

First responders loan

First responders, such as firefighters, EMS, and police, have access to special low down payment loans. These unique loan opportunities are only available through select lenders, so the details will vary. But pursuing this option could help you receive the loan you are looking for. 

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How can I get a loan with low down payment?

You may or may not qualify for a low down payment loan. Take some time to explore your loan down payment loan options to see what you qualify for. 

If you are struggling to qualify for a loan, then you might want to take some time to improve your credit score or otherwise boost your financial standing. With a solid financial foundation, lenders may be more willing to work with you. 

Is it a good idea to buy a home with a loan money down loan?

Whether or not it is a good idea to buy a home with a low down payment depends on your situation. Of course, it is never a good idea to buy more house than you can afford. With that, don’t push your budget to the limits with a low down payment loan. 

However, saving money on the down payment can allow you to keep funds on hand for homeownership costs. You might need to make some improvements to the property or want a cash cushion while you dive into house hacking. 

Want to try house hacking? Check out our House Hacking Quick Start Guide to jump in. 

The bottom line

A low money down loan can help you secure the path to homeownership. Although low money down loans can be helpful getting into the home, that means you’ll have higher monthly payments as you pay down the loan. Don’t forget to take all of the costs into account, such as loan origination fees and PMI, before jumping in. 

Want to dive into homeownership? Get started by building a solid financial foundation.