More with less: A guide to low down payment and no down payment options

You may need less cash than you think to take out a mortgage.

A Guide to Low Down Payment And No Down Payment Options

Does buying a second home or even a new primary residence seem out of reach based on the amount of cash you have on hand? It may not be, with the variety of mortgage products and programs that allow for low or no down payments. Your home mortgage specialist can offer more education on these options to you — or to a family member or friend who is looking to buy a first or next home.

Loan type Features
Conventional fixed-rate loans1
  • 3% minimum down payment for qualified first-time homebuyers
  • Allowable gift funding for all or part of the down payment
  • Primary residence only
Department of Veterans Affairs (VA) loans2
  • Low or no down payment requirement
  • A wide range of rate, term, and cost options
  • Gift funds may be allowed for all or a portion of closing costs
  • Financing can be assumed by qualified veteran and nonveteran buyers when the home is sold
Federal Housing Administration (FHA) loans3
  • Low 3.5% minimum down payment requirement
  • Gift funds may be allowed for all or a portion of a down payment and/or closing costs
  • Financing can be assumed by qualified buyers when the home is sold
Adjustable-rate mortgage (ARM) loans
  • Interest rate and monthly principal and interest (P&I) payments stay the same for five, seven, or 10 years, then adjust annually
  • Typically ARMs have a lower initial interest rate than on a fixed-rate mortgage and the interest rate cap sets a limit on how high your interest rate can go
  • May provide flexibility if you expect future income growth or if you plan to move or refinance within a few years.

Learn More: Making a Down Payment

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When you’re buying a house, in most cases, you’ll need to raise a certain amount of money in advance to use as a down payment. A down payment is money you pay to make up the difference between the price of the home and the amount of the mortgage.

The more money you have available for a down payment on your home, the less you’ll have to borrow. This means you can reduce the interest paid and lower your total mortgage costs.

Your choice of down payment can influence what financing options and interest rates are available to you. The size of your down payment impacts your mortgage amount.

A lot of people ask how they can save for a down payment. Here are three tips you may find helpful:

Pay yourself first: When you pay your monthly bills, make the first payment to your savings or investment account.

Better still, set up an automatic transfer from your checking account to a dedicated down payment savings account, so you don’t forget.

Spend less, save more: The less you spend on items you don’t need, the more you’ll save for a down payment.

Finally, Create a spending plan: Record your expenses and compare them to your income. Tracking your spending habits reveals potential areas where you can save.

When you pay yourself first, spend less and save more, and create a spending plan to follow, you’re on the right track to saving up for a down payment.

1Talk with a home mortgage consultant/me about loan amount, type of loan, and property type requirements to ensure eligibility. Keep in mind that with a low down payment mortgage insurance will be required, which increases the cost of the loan and will increase your monthly payment. We’ll explain the options available, so you can choose what works for you.

2 Up to 100% financing may be allowed with a maximum loan amount of $453,100 (higher amounts possible in high cost areas). Customers must meet all eligibility requirements for the VA program. Please discuss with your Wells Fargo Home Mortgage consultant to review current VA eligibility requirements.

3 FHA loans have the benefit of a low down payment, though you’ll want to consider all costs involved, including upfront and long-term mortgage insurance and all fees. Be certain to ask your home mortgage consultant to help you compare the overall costs of all your home financing options.