Home Loan Options for Borrowers with Low Down Payments

There are few home loan options for borrowers with low down payments. Most mortgage lenders require a down payment of at least 20 percent toward the purchase of a home but, there are a few programs that allow for a lower down payment amount to make buying a home accessible to more Americans.

Special Programs

There are special programs in place for first time buyers. Ask your lender or mortgage broker about the different types of loans that you can obtain as a first time buyer. Some programs do not require any down payment, they are known at 100 percent financing. The loans either give you one loan for the full purchase price or split it up into an 80/20 loan, eighty percent on the first and twenty percent, second mortgage. This is often called a piggyback second loan. The 80/20 loan options became very difficult to find in 2008, with the collapse of the housing industry.

FHA Loans

FHA loans are loans that are insured with the Federal Housing Administration. This makes it possible for buyers with little or no down payment to get into a home with a relatively low down payment. The government program requires a 3.5 percent down payment amount. Also, FHA loans tend to have lower closing costs and make them more ideal for those buyers with less cash on hand for a down payment and closing costs.