How to Get a Mortgage With Only 3% Down

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There's potentially some good news for millions of Americans who have had trouble trying to get into a new home. Bank of America plans to offer a 3% down conforming loan aimed at giving low- and moderate-income homebuyers more access to mortgages, including counseling before and after the loan process.

Called the Affordable Loan Solution, the new mortgage product is available through a partnership with Self-Help Ventures Fund and Freddie Mac, and will let borrowers avoid private mortgage insurance (PMI), a product usually required for low-down-payment loans that can add significantly to monthly mortgage repayments.

"There is a need in today's marketplace for more responsible mortgage products that enable creditworthy homebuyers, who meet certain income limits and other requirements, to become homeowners at an affordable entry point with comprehensive counseling," D. Steve Boland, consumer lending executive at Bank of America, said in a statement.

While the lower down payment can be attractive to buyers without ample savings, it's important to remember that you'll typically pay more for the home through interest on a larger loan amount than you would with more cash down. (You can go here to figure out what your down payment should be.)

Here's what you need to qualify for Bank of America's new loan.
  • The 3% down payment.
  • You must purchase a primary, single-family residence, with no reserve funds required in most situations.
  • Borrowers may use secondary financing, such as an affordable second loan, grants, or even cash they have on hand. The program will also consider non-traditional forms of credit to demonstrate credit history.
  • Loan amounts will be within conforming loan limits (up to $417,000), and applicants' income cannot exceed 100% of the HUD area median income.
  • Applicants must occupy the property, and first-time buyers will need to participate in homebuyer education through Bank of America counselors.
Bank of America said the loans will be available through all of Bank of America mortgage sales channels. According to The Wall Street Journal, the bank plans to ensure that applicants' debt-to-income ratio of is no more than 43%.

The bank is partnering with Self-Help, which will provide post-closing counseling to any borrowers who might be experiencing payment difficulties. Loan servicing will be immediately transferred after origination to Self-Help's designated specialty servicer, who will handle all loans regardless of future performance. Freddie Mac will purchase all of the eligible affordable mortgages originated via the Self-Help and Bank of America partnership.

Getting a Mortgage With a Low Down Payment

Lenders typically require prospective homebuyers to contribute a down payment equal to 3-20% of the sales price of the home. Loans below the 20% mark, including the 3.5% down payment mortgages offered by the Federal Housing Administration, generally require you to pay for PMI, though there are some federal programs in place that let qualified borrowers secure 100% financing. Veterans and current military members, for instance, may be able to utilize the VA loan program, which comes with no down payment or private mortgage insurance requirement.

Keep in mind, even with their relaxed or different credit standards, low down payment loans can be tricky to obtain — and, as previously mentioned, could prove expensive when it comes to fees and interest. Consumers should look into all options, including conventional financing, when buying a home. You should also check their credit scores, since a good one will generally entitle you to better terms and conditions on all home loan types. (You can do so by pulling your credit reports for free each year at and viewing your two free credit scores each month on Tips for improving your credit include paying down high credit card balances, addressing unpaid collection accounts and disputing any errors with the major credit reporting agencies.
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