The Key to Lower Down Payments When Property Values Are High

June 28, 2022

Why now just might be the perfect time to take another look at GSE programs.

The most recent Fed rate hike means low mortgage rates are getting tougher to come by nowadays, but that certainly doesn’t mean brokers are up the creek without a paddle. After all, if we depended on the market to make our jobs easier, we’d all be in the wrong profession!

For many people, it’s still a good time to consider buying a home. Even if it’s a first home. Because with inflation on the rise and rents going up right alongside it, purchasing a home can make a lot of sense for those who can afford a down payment. While 20% down may not be feasible for many Americans — especially with property values near record highs — there are several loan options available to help bridge the gap between the average home buyer and the property of their dreams.

Remember, it’s times like these when pointing clients toward loans with stable terms and low down payments that can help mortgage brokers stand out as a trusted resource.

Expand Your Prospect Base with These Low-Down Payment Loans

As government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac represent a real lifeline in unsteady times. Their loan programs not only allow for lower down payments and credit scores, they also support the borrower by not requiring perpetual private mortgage insurance (PMI) payments.

Let’s start with the down payment. According to a recent CNN story, the average price of a home in the U.S. is now $391,200.* A traditional 20% down payment would be about $78k. But with one of the 3%-down programs mentioned below, the required down payment could be as low as $11,736 — that’s more than $65k less!

Additionally, these GSE programs allow this lower down payment upfront without the threat of PMI payments looming over the borrower for the lifetime of the loan. And that’s because as soon as they pay down approximately 20% through the course of their regular monthly payments, the PMI requirement is considered fulfilled.

Between cancellable PMI payments and affordable down payment requirements, in some situations, as low as 0%, each of the following loan programs provide an excellent opportunity for first-time home buyers. This variety of options should spell good news to strapped-for-cash buyers interested in setting themselves up in a good home for the long run. AFR Wholesale® can help you with all of these loan programs — and more.

Fannie Mae


The HomeReady program from Fannie Mae (also known as the Federal National Mortgage Association or FNMA) offers the peace of mind that comes with stable payments and flexibility in the underwriting process. This program may work especially well for prospective home buyers with low, sporadic, or unconventional income, thanks to fixed rates.

With HomeReady, a borrower can buy a home with as little as 3% down. What’s more, the mortgage insurance requirement starts to go down starting at 90% LTV — and is cancellable when the LTV hits 80%.

HomeReady is also very accessible, with minimum credit scores starting at 620. Some limits on income apply. Your AFR representative can walk you through the process  and help guide you along the way.

Freddie Mac


With a minimum down payment of 3% and a 620 qualifying credit score, the Freddie Mac (also known as the Federal Home Loan Mortgage Corporation or FHLMC) HomeOne Loan Program offers fewer barriers to entry than many home loans.

For example, unlike HomeReady, there are no limits on income or geography with the HomeOne program. However, one of the borrowing parties must be purchasing their first home to qualify and the purchase of manufactured homes is not supported. Borrowers can expect the consistency of a 10-30-year term at a fully amortizing fixed rate.


Similar to the loans already mentioned, this option requires a credit score of just 620 and allows a down payment as low as 3%.

However, with Freddie Mac HomePossible, there is no “first time home buyer” condition — which helps expand the pool of eligible borrowers, though there are some income restrictions that apply. When compared to the HomeOne program, it also requires a slightly longer fixed rate (fully amortizing) loan term minimum with a range between 15 and 30 years.

Government-Backed Programs for the Uniquely Qualified

It’s also worth considering whether or not a client would qualify for a more specialized loan through one of several other government-backed loan programs. VA, USDA, and FHA programs offer varying terms that may be even more advantageous to qualified buyers. Some of these even include 0% down payment options. While some  individuals will not qualify for these loans, those who do will be grateful you steered them in this direction.

Interested in Learning More?

At AFR, we work tirelessly to provide you with the best in a wide range of loan offerings and educational resources. Learn more about a variety of unique loan options and feel free, as always, to contact our team for more information.