A down payment is an initial investment you make when purchasing a home. It goes to the home seller and the rest of the home price is financed by a mortgage lender.  

Money for a down payment can come from your savings, proceeds from selling another home, even gift or grant money. It can be as much as 20% (or even more) of the purchase price, though it’s becoming more and more common to make as little as a 3% down payment.

Where to find a 3% down mortgage

If you’re looking to make a 3% down payment on a mortgage, you have options that include

HomeReady®

Fannie Mae’s HomeReady® mortgage program is designed to help more U.S. households get approved for low down payment loans.

The HomeReady low down payment home loan allows buyers to obtain loans up to $417,000 with 3% down. The highest price home you could buy with 3% down would be about $430,000.

Home Possible®

Freddie Mac’s Home Possible® mortgage program is designed to accommodate the needs of struggling home buyers. It offers perks that range from low down payments to credit flexibility. 

It has more stringent credit requirement than the HomeReady® program or FHA loan, but it does come with lower minimum mortgage insurance premiums that can be removed once you reach 80% equity in your home, you can save a significant amount of money over the course of a 15- or 30-year mortgage.

Can I put less than 3% down on a mortgage?

Depending on your household income and military status, there are a few additional loan programs that can get you into a home for even less than a 3% down payment.

Colorado Housing and Finance Authority (CHFA)

If you’re a first-time home buyer looking to purchase a home in Colorado, you may be able to make as little as a $1,000 down payment thanks to CHFA. CHFA, which stands for the Colorado Housing and Finance Authority, offers incredibly flexible fixed-rate loan programs to Coloradans who do not have enough in savings to cover a down payment of closing costs.

There are a variety of programs within the CHFA loan, so you’ll need to speak with a CHFA preferred lender to understand what is available to you.

Veteran Affairs (VA) loan

If you’re a military veteran, veteran spouse, or you’re on active duty, a VA home loan is one of the most attractive loans available to you. It comew with no down payment, no mortgage insurance, and it’s guaranteed by the government so rates tend to be lower than what’s available in a conventional mortgage.

Most fees are avoidable, but, there is a funding fee that is applied to the VA loan. The funding fee proceeds go directly to the VA and help cover losses on the few loans that go into default. It can be financed, but must be paid at closing time.

Chenoa

The Chenoa Fund works hand-in-hand with a fixed-rate FHA first mortgage on a single-family property, providing assistance up to 3.5% of the home’s purchase price. It’s actually a second mortgage, though it effectively covers the FHA loan’s 3.5% down payment requirement.

The Chenoa Fund can also work with conventional loans, specifically if you choose a HomeReady or a conventional standard 97% LTV loan. You do not need to be a first-time home buyer to take advantage of this down payment assistance.

The bottomline

The less money you put down, the more you need to finance. Let’s not forget you could be looking at added mortgage insurance fees and premiums. 

To determine whether a 3% down payment (or less) mortgage is right for you, it’s important to understand how much it can cost you in the end. Be sure to work with a lender that employs salary-based mortgage consultants or loan officers so you can receive guidance when choosing a loan program and down payment amount. This way, you’re not pressured into a mortgage that can cost you more over time.