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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Tara Moore/Getty Images June 15, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Ruben Çağınalp is an associate writer for Bankrate, focusing on mortgage topics. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Kenneth Chavis IV is a senior wealth manager who provides comprehensive financial planning, investment management and tax planning services to business owners, equity compensated executives, engineers, medical doctors and entertainers. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. With high rent, student loans and rising home prices, many prospective homebuyers struggle to . You don’t have to have a 20 percent down payment to get a mortgage, however. Some conventional loan programs only require 3 percent down. 3 percent down mortgage options
Conventional 97
Backed by Fannie Mae, the Conventional 97 mortgage program, sometimes referred to as 97 Percent LTV Standard, allows you to pay just 3 percent as a down payment, leaving you with 97 percent financing. The down payment doesn’t have to come from your savings — the funds can be a gift from a friend or relative, or other form of . To qualify, you must be a first-time homebuyer or haven’t owned a home in the last three years. Unlike some other 3 percent mortgages, you aren’t subject to income limits, but you’ll need to meet conventional debt-to-income (DTI) ratio requirements and have a credit score of 620 or higher. You’ll also need to complete a . “The underwriting guidelines are no more stringent than for any other conventional 30-year mortgage,” says Dan Green, president of Cincinnati-based mortgage company Homebuyer.com. In addition, the home you’re buying must be your primary residence (meaning you’ll live in it) and a single-family property, which includes approved condos. The purchase price can’t . In 2022, this limit in most housing markets is $647,200. Because you’re putting less than 20 percent down, you’ll also be required to pay for with your monthly mortgage payment. Your premium will be based on your loan-to-value (LTV) ratio — in this case, 97 percent — and credit score. Once you have 20 percent equity in your home, you can stop paying PMI. This applies to any conventional loan program. HomeReady and Home Possible
Both Fannie Mae and Freddie Mac back another 3-percent conventional loan, called HomeReady and Home Possible, respectively. With either of these mortgages, you can make a 3 percent down payment and borrow up to 97 percent. You can use the loan to buy different types of properties, including a single-family home or a home up to four units, or a condo. Unlike Conventional 97, you don’t have to be a first-time homebuyer to qualify for a HomeReady or Home Possible loan, but your income does need to fall under certain limits (unless you’re buying in a specially designated area). You can determine your eligibility for HomeReady using , or Home Possible using . If you are a first-time buyer, you’ll be required to take a homebuyer class. “HomeReady and Home Possible are different flavors of the same loan program, meant to help low- and moderate-income individuals to stop renting and start owning,” says Green. “There are no caveats and no gotchas.” Like most conventional loans with the borrower putting less than 20 percent down, you’ll need to pay PMI, but the premium rates are lower with a HomeReady or Home Possible mortgage. HomeOne
Freddie Mac also backs HomeOne, a 3-percent down, fixed-rate program for first-time homebuyers. Notably, there are no income or geographic restrictions on borrowers, but you’ll be required to pay PMI and complete homebuyer education. You’re also limited to purchasing a one-unit property (including condos) that you’ll use as your primary residence. Other low-down-payment options
– Insured by the Federal Housing Administration (FHA), FHA loans allow borrowers to put down just 3.5 percent with a credit score of 580 or higher, or at least 10 percent with a score as low as 500. However, FHA borrowers with less than 20 percent down must pay for the life of the loan — it can’t be removed like with a conventional loan. “The FHA is a catch-all, serving homebuyers who are not eligible for the other programs,” says Green. “It’s purposefully inclusive and tries to support as many homeowners as possible. You don’t need to be low- or moderate-income to qualify.” USDA and VA loans – USDA and VA loans don’t require any down payment, but they’re only for specific types of borrowers: for borrowers in certain rural areas and for active-duty service members, veterans and surviving spouses. Neither charge mortgage insurance, but USDA loans come with guarantee fees and VA loans come with a funding fee. Bottom line
There are many mortgage options for homebuyers that don’t require you to drain your savings for a down payment or force you to save up for years. Shop around for mortgage lenders to discuss what’s available and what you might be eligible for and to find the best deal. SHARE: Ruben Çağınalp is an associate writer for Bankrate, focusing on mortgage topics. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Kenneth Chavis IV is a senior wealth manager who provides comprehensive financial planning, investment management and tax planning services to business owners, equity compensated executives, engineers, medical doctors and entertainers. Related Articles