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One of the most common misconceptions about mortgages is that you need 20% down to buy a home. Options for buyers with 5 percent down or less show otherwise.
Nothing could be further from the truth.
The fact is that there have always been and always will be mortgage options for borrowers that don’t have a large down payment. Here are five loan options for those who have 5 percent or less for a down payment.
Check your eligibility to buy a house with less than 5% down. Start here (Nov 10th, 2026)
#1: Conventional loans with 5 percent down and PMI
Lenders approve conventional loans using guidelines from mortgage giants Fannie Mae and Freddie Mac. Historically, lenders required a down payment of 20 percent. Private mortgage insurance, or PMI, appeared in 1957.
Mortgage insurance is an insurance policy that repays the lender should the borrower default. The borrower pays for this insurance policy along with their monthly mortgage payment. This extra expense can be well worth it though.
Say a home sells for $200,000. A 20% down payment is $40,000. That’s quite a lot for new home buyers. A 5 percent down payment is much more feasible, at only $10,000. The cost of a PMI policy depends on your credit score and down payment. Your monthly payment includes this cost. But this option helps bring down the barriers to homeownership significantly.
#2: Federal Housing Administration (FHA) loans with less than 5% down
In recent years, FHA has been the standard for first-time home buyers. Although that’s shifting because of increased offerings in conventional lending, they are still very popular.
FHA loans require as little as 3.5% down with a credit score of 580 or higher. With a score of 500 to 579, you need 10% down. That means on a $200,000 home, the minimum down payment is just $7,000.
An FHA loan has a monthly mortgage insurance requirement like a conventional loan. It also has an “upfront mortgage insurance premium,” or MIP. The MIP is 1.75% of the loan amount, or in this example an additional $3,378. However, you do not have to pay this upfront premium out of pocket. You can roll it into the loan amount.
The monthly mortgage insurance premium for a 30-year FHA loan with less than 5% down is 0.55% of the base loan amount per year. You pay it in 12 equal installments as part of your monthly payment. For example, a $193,000 base loan (a $200,000 home with 3.5% down) would require about $88 per month in mortgage insurance. With less than 10% down, you pay it for the life of the loan.
Although an FHA loan is more expensive than its conventional counterpart, it allows for a lower credit score and offers more lenient income requirements. This can make it a suitable program for some home buyers.
Check your eligibility for an FHA loan. Start here (Nov 10th, 2026)
#3: VA loans
This program is a special entitlement for active duty personnel and veterans of the U.S. armed forces. The VA loan requires no down payment whatsoever. In addition, there is no monthly mortgage insurance premium, just an upfront funding fee. The fee is 2.15% of the loan amount for first-time use with no down payment, and 3.3% for later use. Veterans who get VA disability compensation do not pay it.
The minimal costs associated with this loan make it the clear choice for current and former members of the military.
Those who have served in one of the branches of the military including the National Guard or Reserves could be eligible.
For complete guidelines, see our VA home loan page or contact a VA-approved lender.
Check your VA home loan eligibility. Start here (Nov 10th, 2026)
#4: USDA loans
The USDA program, sometimes called the Rural Development Loan, requires no down payment. As the name implies, the program helps borrowers buy and finance a property in rural, less urban areas.
To qualify for a USDA loan, the property must first be in an eligible area. The USDA website maps these areas. This is the first place borrowers should visit to see if a prospective home is eligible. Enter the address on the website to determine the property’s eligibility.
Eligible areas are often rural in nature, but surprisingly, many eligible areas are suburbs of bigger metropolitan areas. Even if you don’t think the area in which you’re looking to buy a home is eligible, it’s worth taking a look at the USDA loan map.
You could discover that you’re able to buy a home with zero down payment. USDA loans also have an income limit. Your household income generally cannot be more than 115% of the area median income. The loan has a 1% upfront guarantee fee, which you can add to the loan, and a 0.35% annual fee.
#5: HomeReady and Home Possible loans
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are conventional loans that let you put down less than 5 percent, as little as 3%. Your household income generally cannot be more than 80% of the area median income. Both programs have reduced mortgage insurance requirements, which can lower your monthly payment.
With HomeReady, if every borrower on the loan is a first-time home buyer, at least one borrower must take a home buyer education course. You do not have to be a first-time buyer to use either program. Ask your lender if you qualify.
Check your home buying eligibility. Start here (Nov 10th, 2026)
A 5% down payment is all you need
Lenders have realized that it’s unrealistic to require a 20% down payment considering today’s home prices. That’s why many programs are available with 5 percent down or less, even to those with less-than-perfect credit and little money saved.
Rates change often, so compare offers from more than one lender. Contact a reputable lender to find out which of these programs might work for you.
Check your eligibility to buy a house with less than 5% down. Start here (Nov 10th, 2026)
