Government Backed Loans That Allow You to Buy a Home with Little to No Down Payment

by Shashank ShekharJuly 17, 2013

After the mortgage meltdown of 2007 and 2008, lending guidelines have become much stricter. Gone are the days when you can get a loan without documenting your income and assets. If you want to get a home loan now, be prepared to document everything and then some more.
With such strict guidelines, there is a common misconception that a minimum 20% down payment is required to buy a home. There are several loan options that allow you to buy a home with less than 20% down payment. Below I detail some options that are backed by government agencies which would allow you to buy a home for little to no down payment:

FHA Loan

These loans are insured by Federal Housing Administration (FHA). It’s the most popular low down payment loan for First Time Home Buyers. FHA allows a down payment of as less as 3.5%. Other benefits include:

  • Low Credit Score to qualify (Typically 640, but could be even less depending on the lender)
  • The entire down payment can be gifted from a relative or a close friend
  • More relaxed guidelines allow for a higher debt-to-income ratios

FHA loan can get a little pricey because of a steep mortgage insurance cost. Also, if you are buying a condominium, FHA lends only on approved condominium projects. Be sure to check with your loan officer if a certain project is FHA approved before making an offer to buy.

VA Loan

This type of loan is insured by Veterans Administration (VA). VA helps Service members, Veterans, and eligible surviving spouses become homeowners. VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan. Some of the benefits of VA loan are:

  • True 0% down payment loan. You can buy a house with putting nothing down. You only have to come up with applicable closing cost.
  • No Private Mortgage Insurance (PMI) premium requirement
  • Closing costs may be paid by the seller
  • Funding fees can be added to the loan amount

Note that both FHA and VA loans are available to purchase a primary residence; you do not have to be a first time home buyer.


This loan is guaranteed by United States Department of Agriculture (USDA). Loan is primarily used to help low-income individuals or households purchase homes in rural areas. Applicants for loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.

These are 30 year loans and requires no down payment.

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About The Author
Shashank Shekhar Best-selling author, Shashank Shekhar (NMLS 8176) is a mortgage lender with Arcus Lending, offering loans for home purchase and refinance. Shashank has been featured as a mortgage expert on Yahoo! News, ABC, CBS, NBC and FOX. He has been named "Top 40 under 40" most influential mortgage professionals in the country.
  • amber
    July 17, 2013 at 3:32 pm

    So if we already have a VA loan with a payoff of $187,000 and looking to sell to get away from the ex wife who is the first house in our sub division…How much can we borrow, if we get an MLS# with sign on lawn, to go ahead and buy a house to get our things out of the house to sell quickly. Do we actually have to have an accepted offer first? It is in prime location and looking to sell it at $210,000+-, 2300 sq feet. Priced to sell! We are working with a Carolina Realitor Agent to buy a house and can use her to sell our house. If this is cheaper through some other means to sell than with her at Carolina Realitors, then please advise.

  • July 19, 2013 at 1:52 pm

    I am interested in prequalifying with my brother to buy a duplex
    or other rental property where he would be a first time home buyer
    and I would help with putting up the downpayment. He would live
    permanently there and I may also ? I own a home in Altadena, CA
    with a mortgage through Green Tree Mortgage. Sharon 🙂

  • Shashank Shekhar
    August 1, 2013 at 4:58 pm

    Hi Sharon – I will be more than glad to help you out. Please reach me at 408.615.0655 or

  • December 12, 2013 at 10:29 am

    VA and FHA loans are a great alternative. Actually with the new rules coming out in January, you’re going to see a lot more folks going that route because now you cannot have up front MI on conventional.

  • James Slayton
    June 26, 2017 at 12:36 pm

    Two disabled males looking to buy a home in Springfield Tennessee . With no down payment first time home buyers with less than perfect credit. Can anyone help us .

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