Avoid PMI Without 20% Down | Guide 2026

“Affordable Loan Solution” program offers 3% down loan

The “Affordable Loan Solution” mortgage is a low down payment loan program from Bank of America. It requires just 3 percent down. Income and loan limits apply, and the program requires mortgage insurance. Buyers who want to avoid PMI without 20% down can look at the VA and USDA loans covered below.

Buy a home with just 3% down

Low- to no-downpayment loans are popular among home buyers.

However, new homebuyers are finding it difficult to come up with 20% of the home value upfront. Fortunately, borrowers don’t need to put 20% down. In some cases, they will only need to put 3 percent down, and potentially, home buyers may not need to make a downpayment at all.

Lenders offer programs that make it easier for a home buyer to qualify for a low downpayment loan. The Affordable Loan Solution is just one of many low downpayment loans available to those looking to get a mortgage.

Low down payment home loan only for certain buyers

This home buying program targets a specific group of aspiring homeowners.

Not every home buyer will be eligible. Some will not meet credit score minimums. Others might earn an income that lies outside of eligible levels.

Requirements include the following.

• Your income must be within the program’s income limits
• The loan must be within the program’s loan limits
• You must purchase the home as your primary residence
• The program may require homebuyer education

The loan gives potential FHA borrowers another mortgage loan option.

While an FHA loan has more flexible eligibility, those that meet the requirement for the “Affordable Loan Solution” loan may find that it is a better option for their budget.

Can you avoid PMI without 20% down with this loan?

Along with the benefit of a low down payment, this program requires mortgage insurance, according to Bank of America’s program page.

PMI was created to allow home buyers to get loans even if their down payment was below the 20% threshold. FHA loans charge their own mortgage insurance premium (MIP) instead of PMI. The annual FHA MIP is 0.55% of the loan amount for most 30-year loans, or 0.50% with 5% or more down. Loans over $726,200 pay 0.70% to 0.75%. Mortgage insurance can significantly increase your monthly mortgage payment in exchange for the benefit of a reduced downpayment.

Other loan options may still be a better fit for some home buyers than Bank of America’s program. For example, an FHA loan allows a credit score as low as 580 with the 3.5% minimum down payment.

Plus, the interest rate on this program could be higher than on FHA, Conventional 97 or HomeReady loans, depending on your financial situation.

Other low down payment loans, including ways to avoid PMI

Bank of America isn’t the only lender offering 3 percent downpayment loans. Large and small mortgage lenders and banks across the country offer low downpayment loans that are not specific to a single lender.

The HomeReady mortgage

HomeReady is a Fannie Mae program that allows 3% down. Lenders set the minimum credit score, and Fannie Mae no longer sets a flat 620 minimum for loans run through Desktop Underwriter. Guidelines limit the borrower’s qualifying income to 80% of the area median income (AMI) for the property’s location.

HomeReady can also help multi-generational households. In a one-unit home, rent from a boarder who has lived with the borrower for the last 12 months can count as qualifying income. The boarder may or may not be a relative, and this rent can make up as much as 30% of the income used to qualify. For example, an adult child whose parent already lives with them and pays rent may be able to count that rent.

Conventional 97 mortgage

The Conventional 97 loan also requires just 3% down. Each lender sets the minimum credit score, often 620 or higher, and Fannie Mae no longer sets a flat 620 minimum for loans run through Desktop Underwriter. Borrowers will have to pay PMI, but under the Homeowners Protection Act you can ask to cancel it when your loan balance reaches 80% of the home’s original value. It ends automatically at 78% of the original value, or at the midpoint of the loan term.

Home Possible is a Freddie Mac program that allows 3% down, and lenders such as Rocket Mortgage (formerly Quicken Loans) offer it. It does require PMI.

USDA loans: avoid PMI with 0% down

Borrowers looking for low down payments should not overlook a USDA loan. USDA loans allow 0% down payment. USDA sets no minimum credit score; lenders set their own, often around 640. They also let buyers avoid PMI without 20% down. Instead, they charge an annual fee that is usually much lower than most mortgage insurance.

USDA loans are only available in areas that are less dense in terms of population, but many suburban areas are eligible. Borrowers may also make up to 115 percent of their area’s median income, making these loans less exclusive than most low-to-no down payment mortgages.

VA loans

For home buyers with qualifying military service, a VA-backed mortgage loan is an attractive option. These loans are available with no down payment and lower interest rates. Borrowers won’t have to pay mortgage insurance either, so a VA loan is another way to avoid PMI without 20% down. There is a one-time funding fee, which allows the program to be self-sustaining. That fee is significantly less than monthly mortgage insurance premiums.

Compare mortgage rates

The best loan option not only depends on your down payment but also on your mortgage rate.

Mortgage rates change daily, and lower rates can make it even easier to afford a new home with a low down payment.