Can I Get a Mortgage Loan Without a Big Down Payment in the Lehigh Valley?
Many buyers believe they need 20% down to buy a home, and that belief keeps a lot of people on the sidelines longer than necessary. In reality, there are several mortgage programs designed for buyers who do not have a large down payment saved.
Whether you’re eyeing a townhome in Allentown, a row home in Bethlehem, or a starter home near Easton, knowing what is available can help you decide when you’re ready to buy and how much cash you will need to bring.
I’m Rich Sywensky, a Senior Loan Officer at RHMC and a lifelong Lehigh Valley resident. When I talk with buyers about down payments, the first thing I want them to know is that they may have more options than they expect. If you are wondering how little you can put down, here are ten questions to ask before getting started.
Table of Contents
1. Can I Get a Mortgage Without a Big Down Payment?
Quick Answer: Yes. Many buyers can purchase a home with far less than 20% down. Depending on the loan program and your situation, the minimum down payment can be as low as 3.5% with an FHA loan, 3% with certain conventional loans, or 0% with VA and USDA loans for eligible buyers.
The 20% figure is a common benchmark because putting that much down generally lets you avoid private mortgage insurance on a conventional loan. It is not a requirement. Putting less down mostly changes the cost of the loan, such as mortgage insurance and a larger loan balance, rather than whether you can buy at all.
Each program has its own credit, income, and property guidelines, so the right option depends on your situation. The questions below walk through the main choices.
2. How Much Do I Need to Put Down on a Home?
Quick Answer: It depends on the loan type. Common minimums are 3.5% for FHA loans, 3% for some conventional loans, and 0% for VA and USDA loans. Your lender may require more depending on your credit, income, and the property.
Here is how the common options generally compare:
FHA: as little as 3.5% down with a credit score of 580 or higher
Conventional (HomeReady and Home Possible): as little as 3% down for eligible buyers
VA: 0% down for eligible veterans, service members, and some surviving spouses
USDA: 0% down for eligible buyers purchasing in eligible areas
PHFA Keystone loans: low down payment options, with additional help available for some buyers
These are general minimums, and lenders can set their own requirements. The down payment is also only part of the cash needed at closing, which we cover in Question 9.
3. How Do FHA and 3% Down Conventional Loans Compare?
Quick Answer: FHA loans may offer more flexible credit and debt guidelines. Conventional programs with 3% down, such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, may offer mortgage insurance that can be canceled later, but they have income limits and credit requirements. Comparing both is the best way to choose.
FHA loans: flexible credit guidelines, with an upfront and an annual mortgage insurance premium. You can read more in our guide to FHA loans for first-time homebuyers in the Lehigh Valley.
HomeReady and Home Possible: income limits based on the area median income, and first-time buyers may be required to complete a homeownership education course
Mortgage insurance: on conventional loans, it can generally be canceled once you build enough equity, while FHA premiums can last longer
Property types: both programs have guidelines for the type of home you can buy
A loan officer can run the numbers on both so you can compare the monthly payment and the long-term cost side by side.
4. Who Qualifies for VA and USDA Zero-Down Loans?
Quick Answer: VA loans are available to eligible veterans, active-duty service members, and some surviving spouses, and typically do not require a down payment. USDA loans offer 100% financing for eligible buyers with moderate incomes who are purchasing in eligible rural areas.
If you qualify, these are the two main programs that allow you to buy with no money down. Here are the basics:
VA loans: you will need a Certificate of Eligibility, and many borrowers pay a one-time VA funding fee, though some, such as veterans with certain service-connected disability ratings, are exempt. VA loans do not require monthly mortgage insurance.
USDA loans: the home must be in a USDA-eligible area and be your primary residence, and household income cannot exceed 115% of the area median household income
Not every Lehigh Valley address qualifies for a USDA loan, so it helps to check the property’s location early. You can start with USDA’s guaranteed loan program page, which links to the property eligibility lookup. If you are a veteran or service member, you can request your Certificate of Eligibility through VA’s Certificate of Eligibility page.
5. How Can PHFA Help Lehigh Valley Buyers?
Quick Answer: The Pennsylvania Housing Finance Agency (PHFA) offers home purchase loans and down payment and closing cost assistance for eligible Pennsylvania buyers. Income limits, purchase price limits, and credit requirements apply, and the programs are offered through participating lenders.
Two PHFA programs are especially relevant for buyers with limited savings:
Keystone Home Loan: a PHFA home purchase loan with low down payment options and income and purchase price limits. Most buyers must be first-time buyers, meaning no ownership of a principal residence in the past three years, though exceptions apply in targeted areas and for veterans.
Keystone Advantage Assistance Loan: a 0% interest second mortgage that can help cover down payment and closing costs, for up to 4% of the purchase price or $6,000, whichever is less. It is repaid monthly over 10 years, has credit score requirements and limits on the assets you have left after closing, and must be paired with certain PHFA first mortgages.
PHFA updates its income limits, price limits, and program rules, so it is worth reviewing the current guidelines with your loan officer before you begin shopping.
6. Are There Local Down Payment Assistance Programs?
Quick Answer: Yes, depending on where you buy. Northampton County has offered a first-time homebuyer loan for eligible buyers, and the Allentown Housing Authority offers renovated homes to income-qualified first-time buyers.
Northampton County first-time homebuyer loan: a county loan for eligible first-time buyers that has offered up to $10,000 toward down payment and closing costs, with a portion forgiven each year you stay in the home
Allentown Housing Authority homeownership program: offers renovated homes to income-qualified first-time buyers. It is a home purchase program rather than down payment assistance, but it may be worth a look if you are shopping in Allentown.
Local programs have income limits, funding limits, and their own application steps, and some require pre-purchase counseling. Asking about them early can help you plan your timeline.
7. Can Gift Funds and Seller Concessions Help?
Quick Answer: Yes. Many loan programs allow gift funds from approved donors, and sellers can often contribute toward closing costs, which can reduce the cash you need to bring. Limits and documentation requirements vary by loan type.
Ways buyers sometimes reduce the cash needed to close include:
Gift funds: money from a family member or other approved donor, with a gift letter and documentation of the transfer
Seller concessions: a seller contribution toward your closing costs, negotiated in the purchase agreement and subject to limits that vary by loan program
Lender credits: credits that can help offset closing costs, which may come with a higher interest rate
If you are planning to use gift funds, let your loan officer know before the money moves so it can be documented correctly.
8. What Are the Tradeoffs of a Smaller Down Payment?
Quick Answer: A smaller down payment means a larger loan, which can mean a higher monthly payment, mortgage insurance, and less equity at the start. For many buyers, getting into a home sooner is worth it, but it helps to see the numbers side by side.
Points to weigh include:
Mortgage insurance: loans with less than 20% down generally include it, and the cost and duration depend on the loan type
Loan size: borrowing more increases the monthly payment and the total interest paid over time
Starting equity: with less equity, you have a smaller cushion if home values soften
Pricing: your down payment and credit profile can affect the interest rate and costs you are offered
Waiting to save more is also a valid choice. A loan officer can compare buying now with a smaller down payment against waiting so you can decide what fits your goals.
9. What Other Upfront Costs Should I Plan For?
Quick Answer: In addition to your down payment, plan for closing costs, prepaid items, inspection and appraisal fees, and cash reserves. These can add up, so it helps to budget for them early.
Common upfront costs include:
Closing costs: lender, title, and recording fees, which vary by loan and by property
Prepaid items: homeowners insurance and property taxes collected at closing
Inspection and appraisal fees
Moving expenses and early repairs or furnishings
Reserves: savings you keep after closing, which some programs require
Your Loan Estimate lists the expected closing costs for your loan, so review it carefully and ask your loan officer about anything that is unclear.
10. How Do I Get Started?
Quick Answer: Start by talking with a loan officer to review your credit, income, and savings, then get pre-approved so you know which programs fit. Many purchases close in approximately 30 to 45 days after the contract is signed, although timelines vary.
The path to buying with a smaller down payment generally includes:
Review your credit, income, savings, and monthly budget
Talk with a loan officer about which low down payment programs you may qualify for
Complete any required homebuyer education
Get pre-approved
Work with a real estate agent to find a home
Make an offer and complete the appraisal and underwriting
Review your Closing Disclosure and close on your new home
Starting early gives you time to improve your credit, build savings, or line up assistance before you make an offer.
Ready to Find Out How Little You Can Put Down?
You do not have to wait until you have 20% saved to start the conversation. Understanding your options before you start shopping can help you move forward with confidence.
Whether you’re buying in Allentown, Bethlehem, Easton, or elsewhere in the Lehigh Valley, I’m here to help you understand your options and guide you through the process.
Rich Sywensky
NMLS #1834172
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