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Getting a mortgage with 5% down

Buy your dream home sooner without saving for a high down payment.

Saving a 20% down payment is simply unrealistic for many homebuyers. Luckily, there are numerous mortgages that require only a 5% or lower down payment. You may have to pay private mortgage insurance (PMI), but a low or no down payment mortgage can get you into the property market faster.

5 programs to buy a home with 5% or less down

If you can’t come up with a big down payment, you don’t have to give up on buying a home. There are programs available for homebuyers with less than 5% to put down on a home.

  1. FHA loan. This is usually the most popular option for low down payment mortgages. Put as little as 3.5% down with an FHA loan.
  2. VA loan. If you’re a veteran or current service member, you might be eligible for a loan with no money down at all.
  3. USDA loan. Like a VA loan, homebuyers can purchase a house with no money down. The one big catch is that you have to be willing to purchase a home in eligible rural areas.
  4. HomeReady mortgage. Backed by Fannie Mae, purchase a home with a 3% down payment if you meet specific requirements. This program is intended to help low- and middle-income buyers purchase a home.
  5. Conventional 97. This additional Fannie Mae-backed program is another option if you only have a 3% down payment.

A smaller down payment means paying more in interest

Getting a loan with such a small down payment inevitably means paying more in interest over time. The difference in interest you’ll pay over the life of the loan can be significant. Here’s an example:

Property cost: $600,000

  • 20% down payment = $120,000 (loan amount of $480,000)
  • Interest rate: 3.65%
  • Loan term: 30 years
  • Monthly payments: $2,195.81
  • Total interest payable: $310,490.12

Property cost: $600,000

  • 5% down payment = $30,000 (loan amount of $570,000)
  • Interest rate: 3.65%
  • Loan term: 30 years
  • Monthly payments: $2,607.52
  • Total interest payable: $368,707.02

You’ll likely need to pay for PMI

Most home loans require a 20% down payment. But some products have a minimum down payment of as low as 3%. This means you can forget the 20% and buy your property with a smaller down payment.

There’s only one catch. Getting a loan with less than 20% down means you’ll have to pay private mortgage insurance (PMI). This is an extra cost that protects your lender, not you, in case you can’t repay your debt. It’s a cost that adds up to thousands of dollars, especially if you’re borrowing 95% of a property’s value.

Before considering getting a loan with a 5% down payment, calculate how much PMI will add to your costs. While PMI costs can be rolled into your mortgage payments — meaning you can borrow this sum along with the money needed to buy a property, it will affect how much you can borrow.

Compare lenders to get the best interest rate

A home is the biggest purchase most of us will make in a lifetime. But surprisingly, 50% of homebuyers don’t shop around for mortgages, and 75% only apply with one lender. This is a costly mistake that could mean paying thousands more in interest over the long run.

To save money, experts recommend getting at least three or four different loan estimates so you can compare rates and fees. A loan estimate breaks down all the costs associated with the loan, including the interest rate, rate locks, prepayment penalties and the monthly payment.

Request as many loan estimates as you want within a 45-day time frame, and it only counts as one credit check — minimizing the impact on your credit score. Get started by comparing lenders now.

Name Product Loan products offered State availability Min. credit score
SoFi
(NMLS #1121636)
SoFi
Conventional, Home equity, Refinance
Not available in: HI, MO, NM, NY, WV
620
No hidden fees, multiple loan terms, and member discounts available.
Rocket Mortgage
(NMLS #3030)
Rocket Mortgage
Conventional, Jumbo, FHA, VA, Refinance
Available in all states
620
Streamline your mortgage from quote to final payment — all from your computer or phone.
Better
(NMLS #330511)
Better
Conventional, Jumbo, FHA, Refinance
Not available in: HI, MA, MN, NV, NH, VT, VA
620
Online preapproval in minutes and no origination fees with this direct lender.
LendingTree
(NMLS #1136)
LendingTree
Conventional, Jumbo, FHA, VA, USDA, Home Equity, HELOC, Reverse, Refinance
Available in all states
620
Connect with vetted home loan lenders quickly through this online marketplace.
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Compare up to 4 providers

If you don’t have 5% saved, your options are limited

It’s possible to buy a property without saving up a 20% down payment. But most lenders require at least 5% down.

In other words, they’ll lend you 95% of a property’s costs, but that 5% needs to be money you’ve saved. This is often defined as money that’s been sitting in your account for at least six months. But there are ways around this:

  • 0% down mortgage. If you can’t come up with 5% down, look into a 0% down mortgage specific lenders offer. These include VA and USDA loans, as well as state- and community-backed loan programs for low-income buyers.
  • Piggyback loan. Some lenders offer piggyback loans, which means taking out a home equity line of credit (HELOC) in addition to your primary mortgage. The funds from the HELOC can be used towards the down payment to eliminate the PMI requirement.
  • Retirement savings. Most retirement savings accounts will allow you to borrow or even withdraw money from your account for the purpose of purchasing a home if you are a first-time homebuyer.
  • Parental guarantor. If your parents own a property, they can use it as security to guarantee your mortgage. You have the option of saving 5% yourself and getting your parents to guarantee the other 15% of the down payment. This way, you can avoid PMI.
  • Selling shares or other assets. Sell off an investment and use the cash as a down payment, but you may need to keep it in your account for six months to satisfy the savings rule.
  • Cash gift or inheritance. If you receive a cash gift or inheritance, you could use this as your down payment — but again, watch out for the genuine savings rule.

How to apply

Using our comparison table, you can sort through loans with 5% down payments and read reviews of the various products and lenders. Look at the fees, flexibility and features the loans come with to get a better idea of which ones work for you.

When you’ve found a product you’re interested in, hit the See rates button and you’ll be taken to either a website or a form where you can add your details and get in touch with a mortgage expert. They’ll guide you through the application process.

To make the process easier, you’ll need to meet the following requirements:

  • Be at least 18 years of age
  • Be a permanent US resident or citizen
  • Have a good credit history
  • Have a good employment history

Once you meet this criteria, you’re ready to proceed with your application. It’s important to ensure you have the following information and documents ready:

  • Proof of identification
  • Employment details
  • Financial details

Bottom line

If you want a mortgage with lower interest rates and the most features, your best bet is to save up a 20% down payment. Unfortunately, that’s simply not realistic for everyone. Luckily, if you have good credit and are willing to pay a little extra for mortgage insurance, you can get a home with only 5% down.

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