10 Best Mortgage Lenders for Low-Down-Payment Loans in 2025

The End of the 20% Down Payment Myth

For generations, prospective homebuyers have been told that a 20% down payment is the golden ticket to homeownership. This deeply ingrained belief has held countless individuals and families back, convincing them that the dream of owning a home is financially out of reach. In a market where the average home price continues to rise, saving tens of thousands of dollars is a monumental task. However, the data reveals a different story: the median down payment for first-time homebuyers was just 9% in 2024, a powerful indicator that the 20% rule is more of a myth than a requirement.

This report serves as a definitive resource, designed to demystify the low-down-payment mortgage landscape. It is a comprehensive guide to the lenders and loan programs that are making homeownership a reality for those without a large sum of cash saved for a down payment. The focus is on providing a clear, actionable path forward, proving that you can purchase a home sooner rather than later and begin building valuable equity.

Here is a summary of the most effective loan programs and the leading lenders that offer them.

Top 5 Low and No Down Payment Loan Programs

• VA Loans (0% Down)
• USDA Loans (0% Down)
• FHA Loans (3.5% Down)
• Conventional Loans (As low as 3% Down)
• Dream. Plan. Home.® Mortgage (Wells Fargo)

Top 5 Recommended Lenders

1. Veterans United Home Loans
2. U.S. Bank
3. Wells Fargo
4. New American Funding
5. Chase

The Lenders: Your Gateways to Low Down Payment Mortgages

The choice of a lender can be just as crucial as the loan program itself. While government-backed programs establish minimum requirements, individual lenders often impose their own, stricter standards for credit scores and debt-to-income ratios. This section provides a detailed breakdown of top lenders, offering a guide that goes beyond generic program rules to provide a clear understanding of what it takes to qualify.

A key to successful homebuying with a low down payment is understanding that not every lender offers the same terms, even for identical loan programs. A lender-specific credit requirement, for example, can be a hidden barrier. For this reason, a detailed comparison is critical to ensure that a borrower’s financial profile aligns with a lender’s expectations before they begin the application process.

Table: Top Lender Low-Down-Payment Comparison

Lender	Available Loan Types	Min. Down Payment	Min. Credit Score (Conventional)	Noteworthy Offerings
Veterans United Home Loans	Conventional, Jumbo, FHA, VA, USDA	0% (VA/USDA), 3% (Conv.), 3.5% (FHA)	620	Specializes in VA loans; 24/7 customer service
U.S. Bank	Conventional, Jumbo, FHA, VA	0% (VA), 3% (Conv.), 3.5% (FHA)	620	Offers options for borrowers without a credit score
Wells Fargo	Conventional, Jumbo, FHA, VA, USDA	0% (VA/USDA), 3% (Conv.), 3.5% (FHA)	620	Dream. Plan. Home.® mortgage for limited credit history
New American Funding	Conventional, Jumbo, FHA, VA, USDA	0% (VA/USDA), 3% (Conv.), 3.5% (FHA)	620	Comprehensive suite of all major low/no down payment loans
Chase	Conventional, Jumbo, FHA, VA	0% (VA), 3% (Conv.), 3.5% (FHA)	620	Top-rated for first-time homebuyers and customer experience

1. Veterans United Home Loans

Veterans United is positioned as the premier choice for military members and veterans. The lender’s entire business model is built around serving this specific demographic, which allows it to provide specialized knowledge and a streamlined experience. This approach has led to a high customer satisfaction rating and the distinction of being a top-rated lender for affordability, availability, and overall borrower experience.

The company specializes in VA loans, which are unique in offering a 0% down payment option with no monthly mortgage insurance. This focus on a niche market allows Veterans United to excel in what it does, providing a level of expertise that a general lender may not be able to match. While it primarily deals in VA loans, the lender also provides conventional, FHA, and USDA loans, offering a complete set of options for military and non-military buyers alike. Their credit requirements are set at a minimum of 620 for both conventional and VA loans, which is a key detail for potential applicants to be aware of before moving forward.

2. U.S. Bank

U.S. Bank stands out as a versatile and comprehensive lender with a wide range of loan options. It is an excellent choice for a variety of borrowers, including those with less-than-perfect credit or limited savings. The institution offers a broad suite of low-down-payment options, including conventional loans with as little as 3% down, FHA loans with a 3.5% down payment, and VA loans with zero down.

One of the most valuable aspects of U.S. Bank’s offerings is its willingness to work with borrowers who may not have a traditional credit score, a flexibility that few major lenders provide. This approach democratizes homeownership for a population that is often overlooked by the mainstream financial system. It is important to note that while the Federal Housing Administration sets a minimum credit score of 580 for its loans, U.S. Bank’s FHA loans have a slightly higher minimum requirement of 640. This disparity underscores a common practice in the lending world: while government programs provide a baseline, individual lenders set their own, often stricter, risk-mitigation standards. This means a potential borrower must not only meet the program’s requirements but also the lender’s, making it crucial to shop around to find the right fit.

3. Wells Fargo

Wells Fargo is a major national lender with a diverse portfolio of low-down-payment options. Beyond its standard offerings, the bank has developed unique, proprietary programs to meet specific consumer needs. It offers conventional fixed-rate mortgages with down payments as low as 3%, and this small initial investment can be supplemented with gift funds and down payment assistance programs without income limitations.

The bank’s Dream. Plan. Home.® mortgage is an innovative product designed for a specific demographic: those who have a limited credit history and earn at or below 80% of their area’s median income. The creation of such a program suggests a clear trend in the financial services industry. Instead of relying solely on traditional government-backed loans, major lenders are now developing their own flexible mortgage products to capture and serve specific market segments that may not perfectly fit into standard lending guidelines. This is a direct, market-driven response to consumer demand, showing a commitment to making homeownership accessible to a wider range of the population.

4. New American Funding

New American Funding is a highly rated lender known for its comprehensive and competitive offerings. For a borrower exploring various low-down-payment options, this lender can serve as a one-stop shop. It offers all four of the primary low- and no-down-payment loan types: conventional (3% down), FHA (3.5% down), VA (0% down), and USDA (0% down). This broad availability is a significant convenience, allowing a borrower to explore their eligibility for different programs with a single institution.

The ability to compare and contrast options under one roof can simplify an otherwise complex process, potentially leading to a more streamlined and successful homebuying journey. The lender’s credit requirement for conventional loans is a minimum of 620, placing it in line with other major national lenders.

5. Chase

Chase is a top-rated national bank that has earned a reputation for being an excellent choice for first-time homebuyers. The institution scores well in several key areas, including affordability, availability, and overall borrower experience, which is a testament to its commitment to the consumer. Chase offers low-down-payment programs that include conventional loans with 3% down, FHA loans with 3.5% down, and VA loans with a zero-down option.

Similar to other lenders, Chase has its own specific credit requirements, such as a 640 minimum score for FHA and VA loans, which is slightly higher than the federal floor for FHA loans. This preference for slightly higher-qualified borrowers, even for government-backed programs, demonstrates that while entry-level requirements are important, customer experience and institutional reputation are equally valuable to consumers. A borrower may be willing to meet a slightly higher credit score requirement in exchange for a smoother, more trusted process.

The Loan Programs: A Deep Dive into Your Options

Understanding the unique features and requirements of each loan program is essential for making an informed decision. While all of these programs aim to lower the down payment barrier, they do so with different structures, eligibility rules, and long-term costs. This section provides an in-depth analysis of each major loan type, moving beyond a simple list to a nuanced discussion of their benefits and trade-offs.

Conventional Loans (As Low As 3% Down)

Conventional loans are not backed by the government. They are often a preferred choice for borrowers with good credit and a stable financial history. Historically, these loans were synonymous with a 20% down payment, but this is no longer the case. The market has shifted, and now many lenders offer conventional loans with a down payment as low as 3%, thanks to programs like Conventional 97 and Fannie Mae HomeReady.

These programs are designed to compete with government-backed loans and make homeownership more accessible. To qualify, a borrower typically needs a credit score of 620 or higher, must meet certain debt-to-income (DTI) ratio requirements, and may need to complete a homeownership education course. The most significant trade-off for a down payment of less than 20% is the requirement to pay for Private Mortgage Insurance (PMI). PMI protects the lender, not the borrower, in the event of default. While this adds an additional cost to the monthly mortgage payment, it is the mechanism that allows a borrower to get into a home sooner and begin building equity. A major advantage of PMI is that it is not a permanent cost; it can be canceled once the homeowner has built at least 20% equity in the property.

FHA Loans (Just 3.5% Down)

FHA loans are government-backed mortgages insured by the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD). They are specifically designed for borrowers who may have a lower credit score, a higher debt-to-income ratio, or limited savings for a down payment. These loans are not exclusively for first-time homebuyers, but they are a very popular option with this demographic.

To qualify for the minimum 3.5% down payment, a borrower must have a credit score of at least 580. Those with scores between 500 and 579 may still qualify but will be required to make a 10% down payment. The most notable feature of an FHA loan is its mandatory Mortgage Insurance Premium (MIP), which is required regardless of the down payment amount. MIP consists of two parts: an upfront premium of 1.75% of the loan amount, which can be rolled into the mortgage, and an annual premium that is paid monthly. The FHA’s mandatory and often-permanent MIP is a direct consequence of the government’s role in providing a safety net for lenders. The program’s flexibility in credit and DTI requirements is made possible by this risk-sharing mechanism, which is an explicit cost to the borrower for the benefit of lower entry barriers.

VA Loans (Zero Down Payment, Zero PMI)

VA loans are a hard-earned benefit for active-duty service members, veterans, and certain surviving spouses. The signature advantage of a VA loan is the ability to purchase a home with 100% financing, meaning a zero-dollar down payment is required for those with full entitlement. Furthermore, unlike conventional and FHA loans, there is no monthly mortgage insurance premium. This policy is a strategic benefit designed to facilitate wealth creation for a deserving population, allowing military families to build home equity faster and retain cash for other investments.

Eligibility for a VA loan is verified through a Certificate of Eligibility (COE) from the Department of Veterans Affairs, which confirms that an individual meets the minimum service requirements. While the VA does not set a minimum credit score, most lenders typically require a FICO score of 620 to qualify for financing. While there is no monthly mortgage insurance, a VA loan does require an upfront funding fee. This fee, which can be rolled into the loan, replaces mortgage insurance and helps sustain the program. The amount of the fee varies based on the down payment, military service type, and whether it is a first-time or subsequent VA loan. Importantly, disabled veterans and surviving spouses are often exempt from paying this fee, a compassionate policy that further eases the financial burden of homeownership.

USDA Loans (Zero Down Payment)

USDA loans are another powerful 0% down payment option, but they are not for everyone. This government-backed program is specifically designed to promote homeownership and economic prosperity in designated rural areas. The USDA accomplishes this by guaranteeing 90% of the loan to approved lenders, which effectively reduces the risk of providing 100% financing to eligible borrowers.

To qualify, a property must be located in an eligible rural area, and the applicant’s household income cannot exceed 115% of the area’s median income. A key feature of the USDA loan is its flexible credit requirements; there is no minimum credit score, though applicants are expected to demonstrate an ability to manage debt. Like FHA loans, USDA loans require both an upfront and an annual mortgage insurance fee, but these costs are typically less expensive than FHA mortgage insurance. The USDA loan program is a clear example of how government policy uses a financial instrument to achieve a social and economic goal: supporting the growth and vitality of rural communities by making homeownership a reality.

Critical Considerations & The True Cost of a Low Down Payment

While a low or no down payment mortgage can be a game-changer for getting into a home sooner, it is crucial to understand the total cost and trade-offs involved. A smaller down payment does not mean the loan is free. In fact, it almost always means a larger loan amount, which will result in higher interest payments over the life of the loan. The most significant additional cost to consider is mortgage insurance, which is a mandatory feature of most low-down-payment loans.

Table: Mortgage Insurance Cost Breakdown

Loan Type	Insurance Name	Upfront Cost	Monthly Cost	Cancellation Policy
Conventional	Private Mortgage Insurance (PMI)	Usually little to none	Varies by credit score and down payment amount	Can be canceled once 20% equity is reached
FHA	Mortgage Insurance Premium (MIP)	1.75% of loan amount (can be rolled in)	0.55% of loan amount	Typically for the life of the loan unless a down payment of 10% or more is made
VA	VA Funding Fee	Varies based on service type, down payment, and prior use (can be rolled in)	None	N/A (One-time upfront fee)
USDA	Annual Fee	1% of loan amount	0.35% of loan amount	Typically for the life of the loan

The comparative costs of mortgage insurance represent the most significant financial implication of a low-down-payment loan. The critical difference between conventional loans with PMI and FHA/USDA loans with MIP is the cancellation policy. With a conventional loan, a borrower can work toward the goal of canceling their PMI, freeing up cash flow once they have built 20% equity in their home. In contrast, FHA and USDA mortgage insurance premiums are often permanent and cannot be removed, which can add a significant cost over the full 30-year term of the loan.

A borrower’s decision should be a personal one, weighing the pros and cons of waiting. Saving for a larger down payment may lead to a smaller loan amount, a better interest rate, and the avoidance of mortgage insurance. However, waiting to save can mean paying rent for a longer period while home prices continue to rise. The ability to buy sooner allows an individual to begin building valuable home equity, which is a powerful tool for building personal wealth.

Essential FAQs about Low Down Payment Mortgages

Q: Do I need a 20% down payment to buy a house?

A: No, this is a common misconception. The median down payment for first-time homebuyers is far lower, and many loan programs, including conventional, FHA, VA, and USDA loans, allow for down payments as low as 0% to 3.5% of the purchase price.

Q: What is a “first-time homebuyer”?

A: The definition of a “first-time homebuyer” can vary by program, but it is typically defined as an individual who has not owned a home in the last three years. While some programs, like Conventional 97, are limited to first-time buyers, others, like FHA and HomeReady, are available to all qualified buyers.

Q: How do credit score requirements differ by loan type and lender?

A: Government-backed programs have minimum credit score requirements (e.g., FHA’s 580 for 3.5% down), but individual lenders can and often do impose their own, stricter requirements to mitigate risk. It is important to compare lenders, as some may approve a loan with a lower credit score than others, even for the same program.

Q: What is mortgage insurance, and does it protect me?

A: Mortgage insurance, whether it is Private Mortgage Insurance (PMI) or a government-mandated premium (MIP), protects the lender—not the borrower—in case the borrower defaults on the loan. It is an additional monthly cost that enables lenders to offer loans with low down payments, but it does not protect the homeowner from foreclosure.

Q: Can I use gift funds for my down payment?

A: Yes, many programs, including conventional and FHA loans, permit a borrower to use gift funds from a relative or down payment assistance programs for their down payment and closing costs.

Q: Are USDA loans really only for rural areas?

A: Yes. The USDA loan program is a government initiative with the specific purpose of assisting low- and moderate-income households in eligible rural areas. The property’s location is a strict requirement for this loan type.

Your First Step to Homeownership

The landscape of home financing has fundamentally changed, offering more pathways to homeownership than ever before. The notion that a 20% down payment is required is a relic of the past, as evidenced by the proliferation of low- and no-down-payment options. The best choice for a prospective homeowner is not a one-size-fits-all answer but rather a decision based on their unique financial situation, eligibility, and long-term financial goals.

The analysis presented here reveals that there is a loan program designed for nearly every type of borrower, whether they are a military veteran, a first-time buyer with limited savings, or someone looking to purchase a home in a rural community. The critical next step is to get pre-qualified with a lender. This simple process can provide clarity on a borrower’s specific options and help them find the right mortgage for their financial profile, turning the dream of homeownership into a tangible and achievable reality.