7 Low & No Down Payment Mortgage Loans (For Bad Credit)

7 Low & No Down Payment Mortgage Loans (For Bad Credit)
Brittney Mayer
By: Brittney Mayer
Posted: October 18, 2016
BadCredit.org's popular "How-To" series is for those who seek to improve, rebuild or better understand their subprime credit rating.

One of my favorite TV shows is a program about people who have particularly strange homes. The episodes have highlighted just about everything you can imagine, including underground houses, converted fire stations, and even a spherical tree house, proving that the creative possibilities are endless.

Regardless of shape, size, or original purpose, though, all of the weird and wonderful houses on the show have one thing in common: they cost money — lots of money.

For most people, that means a mortgage. And mortgages, especially subprime ones, mean giant, expensive down payments, putting all those awesome abodes distinctly out of reach. Right?

Wrong. Not only are there a number of mortgage options for subprime borrowers, but most of those options come with the ability to put down little to no cash up front.

How to Choose | Low Down Payment | No Down Payment

Choosing the Right Type of Loan

Determining the right type of loan can be as simple as doing a little research. You’ll want to start by researching your own finances. You should pull your credit reports from the three credit bureaus (TransUnion, Equifax, and Experian), as well as checking your credit score.

Individual loan requirements, including credit score and income level, will vary by loan type, as well as provider. Knowing where you stand will give you the best idea of which loans you may qualify for, and what kind of loan terms you should expect to see.

Once you know your own situation, start looking at the available options. You may only qualify for a few of them, making the decision an easier one. If you have multiple options available, compare loan types by affordability, including associated fees and down payment requirements.

Low Down Payment Mortgage Programs & Companies

When it comes to mortgage down payments, the bigger the down payment you can muster, the more options you will have open to you. The ideal down payment is 20% of purchase price of the home, but as little as 3.5% can qualify you for most low down payment mortgage options.

Apply for a Federal Housing Administration (FHA) Loan

Probably the most well-known type of government-backed mortgage, an FHA loan is one that has been secured by the Federal Housing Administration, reducing the risk faced by the mortgage lender. The added security encourages lenders to lower their credit score and down payment requirements.

To qualify for an FHA-backed mortgage, you’ll need a credit score of at least 580, though minimum score requirements will vary by lender. On the plus side, you’ll only need a down payment of 3.5% of the home’s purchase price.

Not every bank or lender will offer FHA-backed mortgages, but many of them will. Our expert’s picked their top two companies below.

  • Options for: home purchase, refinance, cash-out, and debt consolidation
  • The nation's largest online lender
  • Allows applicants to buy a home with a minimal down payment (as little as 3.5% down)
  • In some cases, down payment can be a gift from a relative or nonprofit organization
  • Get pre-approved for free – before you shop for your new home – and get more bargaining power
  • Avoid paying Private Mortgage Insurance with PMI Advantage program
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies by Applicant 2000 6 Minutes 9.0/10
  • Easy to OwnSM programs give options for those with lower income, limited credit history, and low down payment needs.
  • Provides the potential for minimal out-of-pocket expenses with seller contributions.
  • Offers loans that don't require monthly mortgage insurance.
  • Requires less cash upfront for your down payment and closing costs.
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1852 6 Minutes 8.0/10

Just as not every lender will offer FHA loans, not every house can be purchased with one. Make sure your potential new home qualifies for the specific type of financing you’d like to use.

Use a Lending Network

For those who want one-stop shopping, a lending network may be the best place to search for a new mortgage. Lending networks connect dozens of lenders across the country, providing users with a variety of custom offers.

  • Options for: home purchase, refinance, home equity, and reverse mortgage
  • Lenders compete for your business
  • No personal information required to get initial offers
  • Receive up to 5 offers in minutes, and pick the best offer for you
  • Founded in 1996, LendingTree has facilitated 55 million+ loan requests and $250 billion+ in closed loan transactions
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies by Applicant 1996 7 Minutes 9.0/10

Due to the nature of the lending network, you may receive offers from unfamiliar companies or out of state lenders. Be sure to research your chosen lender before making any commitments.

No Down Payment Mortgage Programs & Companies

While you’ll always be better off putting down some kind of down payment, sometimes it just isn’t feasible. Your options will be much more limited without a down payment, and may cost you more in the long run, but there are options.

Take on Private Mortgage Insurance

To most lenders, anything less than a 20% down payment on your mortgage loan makes you a risky investment. To combat that risk, almost anyone who puts down less than 20% on their mortgage will likely pay some kind of mortgage insurance, which compensates the lender should you default on your loan.

Taking on a larger mortgage insurance premium can decrease the amount of down payment you are required to provide, with some qualifying for 0% down payment loans with enough mortgage insurance.

  • Loan programs include down payment and closing cost assistance.
  • Variable and Fixed-Rate loans available with flexible qualification guidelines.
  • Up to 100% financing—with as little as zero down payment for qualified borrowers.
  • No maximum income/earning limitations.
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 2008 5 Minutes 7.0/10
  • Low or no down payment required; flexible credit guidelines.
  • Seller can contribute up to 6% of sales price.
  • Streamlined refinance programs that speed the closing process.
  • Closing costs can be rolled into the loan.
  • Opportunities Within Neighborhoods (OWN) programs offer low down payment options, flexible credit criteria and other attractive features to meet the needs of many low- and moderate- income borrowers and those purchasing homes in low- and moderate - income areas.
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1998 9 Minutes 8.0/10

Keep in mind that mortgage insurance may reduce the immediate out-of-pocket costs when purchasing a home, but that flexibility doesn’t come free. Mortgage insurance carries a rate of 0.3%-1.2% of your loan balance, and is usually paid via monthly installments alongside your mortgage payment.

Consider U.S. Department of Agriculture (USDA) Loans for Rural Homes

If you’re looking to make your home in the country, and can meet the basic income requirements, then a USDA-backed home loan may be a good option. Loans backed by the USDA don’t require a down payment, but can only be obtained for a primary residence in a qualifying rural area.

  • Offers 100% Financing, Low rates and Affordable Payments.
  • Helps lenders work with low and moderate income families living in rural areas to make home ownership a reality.
  • Loans can be used for repairs and rehabilitation; physical disability equipment; connection fees, assessments or installment costs for utilities; and essential household equipment.
  • Loans can include closing costs and reasonable/customary expenses associated with the purchase
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1897 9 Minutes 9.0/10

For anyone who currently lacks safe rural housing, and cannot qualify for a reasonable home loan through any other venue, the USDA also offers the Section 502 Direct Loan Program. Section 502 loans have no down payment or minimum income requirements, but are only for those who can demonstrate extreme need.

Military Personnel May Qualify for a Loan Through the Department of Veterans Affairs (VA)

Similar to a USDA or FHA loan, a VA loan is a mortgage loan secured by the Department of Veterans Affairs, designed to encourage lenders to loan to those in service. To qualify, you must be an active or retired member of the military, reservists, or National Guard.

VA loans do not require a down payment, so long as the house appraises at, or below, the total amount of the loan. Borrowers will also be able to skip the mortgage insurance and any early payment fees associated with the loan.

  • For military veterans, service members, their spouses, and other eligible beneficiaries only
  • No down payment and no monthly mortgage insurance
  • The basic entitlement available to each eligible veteran is $36,000
  • Lenders generally loan up to 4 times a veteran's available entitlement without a down payment
  • Click here for application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies by Applicant 1944 9 Minutes 7.5/10

The number of days of active duty required to qualify for a VA loan will vary based on when you served, with the average tenure requirement being 90 continuous days of service.

Don’t Overextend Yourself

Whether you choose to live under the ground or up in the trees, there is one important thing to remember about your new home: it comes with a lot of debt. Never, ever forget that a mortgage represents a debt you owe to your lender, and that debt must eventually be repaid.

Make sure the house you buy is the house you can afford, not just the biggest or the prettiest. Use a loan calculator to determine your price range, then stick to your budget. The best way to avoid ending up in foreclosure, or otherwise defaulting on your housing debt, is to simply purchase responsibly in the first place.