Finder makes money from featured partners, but editorial opinions are our own. Advertiser disclosure

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.

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.

Megan B. Shepherd's headshot
To make sure you get accurate and helpful information, this guide has been edited by Megan B. Shepherd as part of our fact-checking process.
Heather Petty's headshot
Written by

Staff writer

Heather Petty was a personal finance writer at Finder, specializing in home and personal loans. After falling victim to a disreputable mortgage broker when buying her first home, she’s on a mission to help readers avoid similar experiences when managing their own finances. A self-proclaimed word nerd, her writing and analysis has been featured on MSN, Credit.com and MediaFeed, among other top media. Heather previously worked as a technical writer and editor for the casino systems industry and is an internationally published young adult mystery author. She earned a BA in English with a minor in journalism from the University of Nevada, Reno. See full bio

Heather's expertise
Heather has written 106 Finder guides across topics including:
  • Home loans
  • Home equity products
  • Homeowners insurance

More guides on Finder

Ask a question

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site