A 3% down payment mortgage is best suited for responsible homebuyers who may not have the financial resources to make a large down payment. Homebuyers will need to meet other underwriting requirements, and document their income. A mortgage lender can help you understand your eligibility.
At least one buyer must be a first-time homebuyer—in this case, "first-time homebuyer" means that you haven’t owned any residential property in the past three years or, if you are buying the home with someone else, that at least one of you hasn’t owned in the past three years.
Yes, certain funds you’ve received as a gift from a relative, a grant, or from other sources can be used toward your down payment and closing costs. There may be down payment assistance funds available in your area, too. Research your options—funds may be available from your local housing finance agency, your employer, nonprofit agencies, and others.
If your down payment is less than 20% of the home’s purchase price, you will need to pay Private Mortgage Insurance (PMI), generally as part of your mortgage payment each month. Unlike the mortgage insurance premium required on an FHA loan, you may be able to cancel PMI after you reach 20% equity in your home, either through paying down your mortgage over time or if the value of your home increases while you own it. Consult with your lender for the specifics about PMI cancellation. This could save you money over time.
To be eligible for the 3% down payment option, you must plan to live in the home as your primary residence. Homes being purchased as investment properties or second homes will require a larger down payment.