Best Lenders

Best low and no down payment mortgage lenders in 2021

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If you meet eligibility requirements, it’s possible to get a low- or no-down payment mortgage, which can put you on an easier path to homeownership. Bankrate examined several mortgage lenders to uncover the best for these types of loans, based on measures including low-down payment programs, lower fees and other opportunities to save. Here is our guide to the best low- and no-down payment mortgage lenders in 2021.

Best low- and no-down payment mortgage lenders

PennyMac

PennyMac, a California-based direct national mortgage lender and servicer, boasts an array of low- and no-down payment loan options, including:

  • Conventional loans (3 percent down)
  • Fannie Mae HomeReady and Freddie Mac Home Possible loans (3 percent down, and allows down payment funds from a range of sources)
  • FHA loans (3.5 percent down)
  • VA loans (No money down)
  • USDA loans (No money down)
  • Investment property loans (10 percent down for second or vacation properties, 15 percent down for certain investment properties)

What to know: PennyMac currently doesn’t have an origination fee for conventional or FHA loans, which can save you $1,100, according to the lender. The lender also discounts fees on VA loans by $1,100, and offers a reduced fee on investment property loans. You might be eligible for further discounts if your employer partners with PennyMac, as well. The lender has no brick-and-mortar locations, however, so in order to apply for a mortgage, you have to start the process online or by phone.

Mr. Cooper

Mr. Cooper (formerly Nationstar Mortgage) is a non-bank mortgage lender and servicer available in all states in the U.S., with a range of loan programs, including low- and no-down payment options such as:

  • Conventional loans (5 percent down)
  • Fannie Mae HomeReady and Freddie Mac Home Possible loans (3 percent down, and allows down payment funds from a range of sources)
  • FHA loans (3.5 percent down)
  • VA loans (No money down)

What to know: While there aren’t any branch locations to visit, Mr. Cooper has a streamlined digital platform that makes the loan process simple to initiate online. If you buy a home through Mr. Cooper’s “Real Estate Rewards” program, you could receive a bonus credit equal to $1,350 in savings on a $300,000 property. (This program isn’t available in every state, however.) In addition, you can count on the lender’s “Close On Time Guarantee,” which promises a check equivalent to your first full month’s mortgage payment (principal and interest) if your closing is delayed due to the fault of the lender.

Wyndham Capital Mortgage

Wyndham Capital Mortgage has done big business as a digital lender, serving over 60,000 borrowers and funding $18 billion-plus in home loans in the past 20 years. Its low- and no-down payment mortgages include:

  • Conventional loans (3 percent down)
  • FHA loans (3.5 percent down)

What to know: Wyndham Capital Mortgage operates in the majority of states, and as with many lenders today, its services are purely digital, with no branch locations. While the lender doesn’t offer as wide a range of low- and no-down payment options as some competitors, Wyndham Capital Mortgage has no lender fees, “hidden costs” or “unnecessary charges,” according to its website. In addition, the lender backs up closings with its “On-Time Closing Guarantee,” which gives you $5,000 (and $5,000 to the seller) if your closing is delayed on the part of the lender.

Freedom Mortgage

In business now for over three decades, Freedom Mortgage’s combination of robust online presence and 100 branches give borrowers, especially those seeking a VA loan, access to a variety of loan products, services and support. The lender’s low- and no-down payment programs include:

  • Conventional loans (3 percent-5 percent down)
  • FHA loans (3.5 percent down)
  • VA loans (No money down)
  • USDA loans (No money down)

What to know: For current customers, Freedom Mortgage has several perks that can lead to savings, including a “Low Rate Guarantee” that gives you a $250 prepaid card if the lender can’t match a competitor’s rate, and a $1,000 “Close on Time Guarantee” if your loan doesn’t close on time. (The latter, however, doesn’t apply if you’re using down payment assistance.) Freedom Mortgage also has a partnership with Genworth Mortgage Insurance to help current customers cover up to $7,500 in furniture, moving and other costs.

Rocket Mortgage

Rocket Mortgage, an affiliate of Quicken Loans, is an all-digital lender boasting speedy loan processing, flexible terms and a simplified online application and rate-lock process. The low- and no-down payment mortgages from this lender include:

  • Conventional loans (3 percent-5 percent down)
  • FHA loans (3.5 percent down)
  • VA loans (No money down)
  • “YOURgage” flexible-term loans (3 percent down)

What to know: From start to finish, Rocket Mortgage has a completely digital lending process, and it was named one of Bankrate’s best online mortgage lenders in 2021. Through Quicken Loans, the lender offers its proprietary “YOURgage” product that enables borrowers to set the terms of their loan from eight to 29 years. This latitude allows borrowers to customize a loan program that suits their preferred repayment schedule. Rocket Mortgage doesn’t offer no-down payment USDA loans, however, unlike some other lenders on our list.

Low-down payment mortgages

Many mortgage lenders offer at least one low-down payment loan. Here are the most common:

Conventional 97 loans HomeReady/Home Possible loans FHA loans
3% down 3% down 3.5% down
620 credit score Flexible underwriting 580 credit score (500-579 score with 10% down)
Income limits Income limits No income limits
First-time homebuyers First-time and repeat homebuyers First-time and repeat homebuyers

No-down payment mortgages

Lenders also offer no- or zero-down payment VA or USDA loans for certain types of borrowers. Here’s what to know:

VA loans USDA loans
No money down No money down
Flexible underwriting Flexible underwriting
No income limits Income limits
Eligible servicemembers, veterans and spouses Borrowers in eligible locations

Low- and no-down payment mortgages: Pros and cons

Pros

  • Gets you out of renting and into a home sooner
  • Allows you to buy a home now instead of in the future, when it could cost more
  • Allows you to reserve your savings (if applicable) for emergencies or other goals

Cons

  • Less money down means you’re borrowing more, which translates to higher monthly mortgage payments
  • Limited equity upfront so you can’t use it in an emergency, and if the market turns, you could owe more than the home’s worth
  • Low-down payment loans require mortgage insurance
  • Low-down payment loans could come with higher interest rates
  • No-down payment loans come with extra fees
  • Some sellers consider less money down a negative, which can be a disadvantage in a hot market

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