Buying a home is an exciting milestone in life. However, saving up enough for a 20% down payment can be a major hurdle especially for first-time homebuyers. That’s where 10 percent down mortgage loans come in handy.
What is a 10 Percent Down Mortgage?
A 10 percent down mortgage, also known as a 10 down loan, is simply a mortgage that only requires a 10% down payment. This makes homeownership more accessible to buyers who don’t have enough savings for the recommended 20% down payment.
With a 10 down mortgage, you only need to save enough for a 10% down payment instead of 20%. This significantly reduces the amount you need upfront to buy a home.
How Do 10 Down Mortgages Work?
A 10 down mortgage works just like any other mortgage, except you only put 10% down instead of 20%. Here’s a quick overview:
-
You make a down payment of 10% of the purchase price. For a $200,000 home, that’s $20,000.
-
You finance the remaining 90% of the price with a mortgage loan. In our example that would be $180000.
-
You pay back the loan over time through monthly mortgage payments, typically over 15 or 30 years.
-
Your monthly payment covers principal, interest, taxes, and insurance (PITI).
The key benefit of a 10 down mortgage is needing less cash upfront. The tradeoff is you finance more, pay more interest over time, and likely pay mortgage insurance.
Pros and Cons of 10% Down Mortgages
10 down mortgages offer some nice perks but also have some potential drawbacks to consider:
Pros:
-
Lower down payment requirement – Only 10% needed instead of 20%
-
Improved affordability and accessibility for buyers without much savings
-
Potentially avoid jumbo loan requirements and pricing
Cons:
-
Higher monthly payments since you finance more
-
More interest paid over the life of the loan
-
Must pay mortgage insurance until you build 20% equity
-
Potentially higher interest rate than 20% down mortgages
Overall, 10 down mortgages provide an excellent option for buyers who want to purchase sooner without draining their savings. Just be mindful of the higher costs over time.
10 Down Mortgage Options
You have several options when it comes to 10 percent down mortgage loans:
Conventional 97: A conventional mortgage with only 3% down. You pay mortgage insurance until you reach 20% equity.
FHA loan: Insured by the Federal Housing Administration. Requires just 3.5% down and is popular with first-time homebuyers.
USDA loan: Backed by the U.S. Department of Agriculture. Requires zero down payment for eligible rural properties.
VA loan: Available to military families. Requires zero down payment and no mortgage insurance.
HomeReady/Home Possible: Special mortgages for low-to-moderate income buyers. Allow down payments as low as 3%.
Piggyback loans: Combination of a first and second mortgage to reach 90% LTV. Allows avoiding jumbos and mortgage insurance.
Family gift: Receive part of the down payment as a gift to reach 10%.
10 Down Mortgage Requirements
While requirements vary by program, here are some typical requirements for a 10 down mortgage:
-
Credit score: 620 minimum in most cases
-
Debt-to-income ratio: Max of 45% in total monthly debt payments
-
Income verification: Pay stubs, W-2s, tax returns to confirm your income
-
Down payment funds: Documentation showing you have the down payment, like bank statements
-
Homebuyer education: Completion of an approved course if using certain programs
Meeting these requirements ensures you get approved and set yourself up for success as a homeowner. Be sure to consult your lender for specifics.
How to Get a 10 Percent Down Mortgage
If you’ve decided a 10 down mortgage is right for you, here are the key steps to get one:
1. Check your credit score and reports. Aim for a score of at least 620 or better. Review all three credit reports and dispute any errors.
2. Reduce debt to lower DTI. Pay down credit cards and other debts to get your DTI below 45%.
3. Save for your down payment. Come up with at least 10% of the home’s price for your down payment.
4. Get preapproved. Work with a lender to get preapproved and confirm you qualify and can afford your target home price.
5. Shop and make an offer. With your preapproval letter in hand, you can start shopping and make an offer when you find the right home.
6. Finalize loan and close. Provide any additional needed documents, complete the final loan application, and get ready to close and move into your new home!
10 Down Payment Assistance Programs
If you’re having trouble saving enough for even a 10% down payment, down payment assistance programs may help fill the gap. These programs provide grants, forgivable loans, or secondary financing to cover all or part of your required down payment.
Down payment assistance is offered by housing finance agencies, state and local governments, nonprofits, and even some lenders and real estate agents. Eligibility is based on financial need, location, income limits, and other factors.
The assistance may be paired with FHA, USDA, or conventional loans. Be sure to research programs available in your state or area. Even a relatively small amount of help can get you over the hump to homeownership.
Is a 10 Down Mortgage Right for You?
So how do you know if a 10 percent down mortgage is the right option for your home purchase? Here are a few key questions to ask yourself:
-
Do you lack savings for a 20% down payment? The biggest indicator that a 10 down mortgage makes sense. This shortcut helps you buy sooner.
-
Are you purchasing in an expensive market? Low down mortgages help break into high-cost areas that would otherwise be unattainable.
-
Will mortgage insurance fit your budget? MIs can add hundreds per month. Make sure it’s affordable.
-
Do you have a stable income and good credit? Low down mortgages work best for qualified buyers who can handle the payments.
If you answered yes to one or more of these questions, a 10 down mortgage could be a great fit to make homeownership more accessible.
Alternatives to Low Down Payment Mortgages
While 10 down mortgages allow fast access to homeownership, they aren’t your only option:
-
Save longer for 20% down – Avoid mortgage insurance and score better rates
-
Use loan programs with no down payment – Like VA, USDA loans
-
Explore low down payment options – Including 3-5% down programs
-
Consider adjustable-rate mortgages – Get lower initial payments with 5/1, 7/1, 10/1 ARMs
-
Buy lower-priced properties – Lesser-expensive homes need smaller down payments
Look at all your choices and run the numbers to see what works best in your situation.
Key Takeaways on 10 Percent Down Mortgages
Some final thoughts to wrap up our complete guide to 10 down mortgage loans:
-
A 10% down payment significantly improves affordability compared to 20% down.
-
You’ll need to pay mortgage insurance with only 10% down until you build 20% equity.
-
Interest rates may be slightly higher than 20% down mortgages.
-
Ensure you qualify and can handle the payments before pursuing this option.
-
There are many loan programs available with only 10% or even less down.
-
Down payment assistance is an option if you need help with the 10%.
-
Make sure a 10 down mortgage aligns with your budget and homeownership goals.
The bottom line is that 10 down mortgages allow faster access to homeownership. But be deliberate in assessing if this route makes good financial sense in your situation. With the right prep and planning, it can be an optimal path to finally realizing your dreams of owning a home.
Flexibility in cash reserves
By making a smaller down payment, you can maintain an emergency fund and have more cash on hand for unexpected expenses. This provides a sense of financial security and helps you avoid taking on additional debt in case of unforeseen circumstances, such as job loss or medical emergencies.
How much should you put down on a house?
What is the typical down payment for a house?
Consider that the median buyer puts down just 13%. This amount reduces to 8% for buyers under the age of 32, while some mortgage loan programs even allow for as little as 3% or no down payment at all.
Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s a myth that this is always necessary. In fact, most people opt for a much lower down payment. Choosing a smaller down payment over becoming “house poor” from a 20% down payment is often the better choice.
In this article (Skip to…)
What are the Pros and Cons of Buying a Home With An 80 10 10 Loan?
FAQ
Can you get a mortgage with 10% down?
What loan requires 10% down?
Is 10% ok for a down payment?
How to only put 10% down on a home?
What is a low-down-payment mortgage?
A low-down-payment mortgage is a home loan that requires you to pay less than 20% of your home’s purchase price upfront.
Can you get a mortgage with a 10 percent down payment?
Rather than managing merely a mortgage, you have a second loan to repay as well. If you don’t want to take on more debt but want to get a mortgage with just 10% down, you can use a home ownership investment instead. Home ownership investment programs like the Unison HomeBuyer program only require a 10% down payment.
What if I don’t have a 20% down payment?
Even if you don’t have a 20% down payment, you can avoid the cost of private mortgage insurance (PMI) with an 80-10-10 loan. You take out a primary mortgage for 80% of the purchase price and a second mortgage for another 10%, while making a 10% down payment.
Can I get a mortgage if I have 10% down?
Here’s a quick comparison chart to help you evaluate your options when you have 10% down: You can get a standard mortgage with just 10%. Your monthly mortgage payments will be higher because you’re financing more and paying PMI. Buyers who won’t save money with other options, like FHA loans or piggyback loans.