The cheapest way into a home is not the program with the lowest advertised rate. It is whichever structure wins on total cost of ownership: cash to close, monthly payment, mortgage insurance, and the cost of getting out later. Here is the same $300,000 purchase priced three ways. The figures are hypothetical and assume $9,000 of closing costs and prepaids in each case. Taxes and homeowners insurance are left out because they do not change between options.
- FHA, 3.5% down at 6.25%: about $19,500 to close, roughly $1,946 a month including mortgage insurance.
- Conventional, 3% down at 6.25%: about $18,000 to close, roughly $1,937 a month including private mortgage insurance.
- FHA with down payment assistance, 6.50% first mortgage: about $13,500 to close, assuming a hypothetical $6,000 of assistance, and roughly $1,995 a month.
The lowest cash requirement and the lowest payment belong to different structures, so the winner depends on how long you keep the loan. I call that process Dare to Compare, and it starts with a soft credit pull mortgage review, not a hard inquiry. Don’t guess your rate. Shop it.
By Duane Buziak, NMLS #1110647
1. FHA Loans
FHA loans are insured by HUD, which is why wholesale lenders will accept a 3.5% down payment with a credit score of 580 or higher (a 10% down payment for scores of 500 to 579), as of 2026. The insurance is paid through MIP, the mortgage insurance premium. That is an upfront 1.75% of the base loan plus an annual premium billed monthly. FHA is a program that prices risk through insurance instead of a steep rate penalty, not a program reserved for damaged credit. Plenty of buyers with good scores choose it when their down payment is thin.
Labelled illustration, hypothetical 6.25%, 30-year fixed: on a $300,000 home, the down payment is $10,500 and the base loan is $289,500. Upfront MIP of 1.75% is $5,066.25, financed into a loan of $294,566.25. Principal and interest come to about $1,813.70. Annual MIP at an assumed 0.55% of the base loan adds about $132.69 a month, for roughly $1,946 in total. Adding placeholder taxes of $250 (1% of value a year) and insurance of $125 gives a full monthly cost near $2,321. Replace the placeholders with the real figures from your county assessor or tax collector and your insurance quote.
To put it into practice:
- Start with a soft-pull credit review to confirm your score and debt-to-income ratio (DTI) with no impact on your credit.
- Request an FHA Loan Estimate that shows upfront MIP, annual MIP, and cash to close.
- Check HUD’s current MIP schedule, because the annual rate and duration depend on loan size, term, and down payment.
- Get a conventional quote on the same home and compare MIP duration against private mortgage insurance.
The common mistake is overlooking that with under 10% down, MIP generally lasts the life of the loan. Price the exit before you commit. If the home appreciated to $350,000, the balance after 60 payments would be about $274,900, an LTV (loan-to-value ratio) near 78.5%. At that point a refinance into conventional could end the MIP.
What to measure: cash to close, and the total monthly payment including MIP against the conventional alternative.
2. Conventional 3% Down (HomeReady and Home Possible)
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible allow 3% down on loans within the FHFA conforming limit. Borrower income is generally capped near 80% of area median income, as of 2026. Rules vary by product and property type, so confirm them against the current guides. The key difference from FHA is that PMI, the private mortgage insurance on conventional loans, is cancellable. It is also priced by credit tier, so strong scores pay noticeably less.
Labelled illustration: on a $300,000 home, 3% down is $9,000 and the loan is $291,000. At a hypothetical 6.25%, principal and interest are about $1,791.74. PMI at an assumed 0.60% a year adds $145.50, for roughly $1,937 a month. You can request PMI cancellation when the balance reaches 80% of the original value, which is $240,000. On the scheduled amortization that takes about 130 payments, roughly 10.8 years. Total PMI paid over that stretch is near $18,900. Federal law requires automatic termination at 78% of original value, $234,000 here, which lands near payment 141. Appreciation, extra principal payments, or a new appraisal can shorten the wait.
Put it into practice this way:
- Check income eligibility against the area median income lookup for the property’s county.
- Get PMI quotes at several credit tiers, for example 680, 720, and 760, so you see how much a score bump is worth.
- Model the month PMI could drop off, with and without a modest annual appreciation assumption.
The common mistake is assuming PMI is always cheaper than FHA MIP. At lower scores it often is not. Compare quotes at your actual score, not a marketing example.
What to measure: monthly payment including PMI, and projected months until PMI removal.
3. VA Loans
For eligible service members, veterans, and some surviving spouses, a VA loan offers zero down and no monthly mortgage insurance. In exchange there is a one-time funding fee, a percentage of the loan that can be financed. As of 2026, the first-use, zero-down fee is 2.15% according to the VA funding fee table. Confirm it before relying on it, because the fee changes with use and down payment. Borrowers receiving VA disability compensation, among other groups, are exempt.
Labelled illustration: a $350,000 purchase with no down payment. Financing a 2.15% fee ($7,525) makes the loan $357,525. At a hypothetical 6.0%, the payment is about $2,143.54 with no monthly mortgage insurance. For an exempt borrower the loan stays at $350,000 and the payment drops to about $2,098.43. An FHA loan on the same home at a hypothetical 6.25% needs $12,250 down, finances $5,910.63 of upfront MIP into a $343,660.63 loan, and runs about $2,270.78 a month with annual MIP. The VA structure wins on both cash and payment in this scenario. Rates are hypothetical and will differ by day and borrower.
The steps:
- Obtain your Certificate of Eligibility (COE). I can often pull it electronically using your Social Security number and date of birth.
- Confirm funding fee status, including any exemption tied to a disability rating.
- If you have used entitlement before, calculate the second-tier (bonus) entitlement: multiply the county loan limit by 25% for the maximum guarantee, subtract the entitlement already used, then multiply the remainder by four for the zero-down purchase limit. For example, with a placeholder limit of $500,000, that is ($125,000 – $40,000 used) x 4 = $340,000.
- Compare VA quotes from multiple wholesale sources. Veterans-focused retail shops such as Veterans United show their own pricing only.
The common mistake is defaulting to FHA out of habit, or missing a funding fee exemption. What to measure: total cash at closing and monthly payment against an FHA quote on the same home.
4. USDA Loans
Many buyers assume USDA means farms. In practice, the USDA guaranteed program covers eligible properties, often in rural areas and the edges of suburbs, for households under income limits. The map decides, not the look of the property. Income limits depend on county and household size, so check the current USDA table. The program allows 0% down and charges an upfront guarantee fee and a lower annual fee than FHA. As of 2026 that is commonly 1.00% upfront and 0.35% annually, but verify against USDA before quoting.
Labelled illustration: a $300,000 suburban-edge home inside an eligible area, bought with 0% down. A 1.00% upfront fee of $3,000 is financed, making the loan $303,000. At the same hypothetical 6.25%, principal and interest are about $1,865.63. The 0.35% annual fee adds about $88.38 a month, for roughly $1,954. The FHA loan from strategy 1 runs about $1,946 a month. The payments are close because USDA finances more, but cash to close is about $9,000 versus $19,500 for FHA under the same assumptions. In real quotes, USDA’s rate is often what separates the two.
The steps:
- Enter the address on the USDA eligibility map, since eligibility is address-specific.
- Confirm total household income against the limit for your household size. Income counts for everyone in the household, not just the borrowers.
- Request a USDA quote and put it beside FHA and conventional quotes.
The common mistake is ruling out a property because it is not on a farm without ever checking the map. Check before you skip it. What to measure: the eligibility result first, then monthly cost against FHA and conventional.
5. Down Payment Assistance (Dynamo and Turbo DPA)
DPA, or down payment assistance, programs reduce the cash you need at closing when paired with an eligible first mortgage. Dynamo and Turbo DPA are options I work with, and the exact amounts, income limits, and property rules depend on the program and your state. Confirm them with me before you plan around any figure. Mechanically, assistance usually arrives as a second lien that is forgiven over time, deferred, or repaid, and some pairings carry a slightly higher first-mortgage rate.
Labelled illustration: on a $300,000 FHA purchase, the 3.5% down payment is $10,500. Suppose, hypothetically, that $6,000 of assistance covers part of it, so your own cash drops to $4,500. If pairing the assistance moves the first mortgage from 6.25% to 6.50%, principal and interest rise from about $1,813.70 to $1,861.87, an extra $48.17 a month. Over five years that is about $2,890. If the $6,000 second lien is deferred and repaid at sale or refinance, the five-year cost is roughly $8,890 against $6,000 of cash saved up front. That can still be a good trade if cash is your constraint. If it is forgivable, the math improves.
To put it into practice:
- Confirm state, income, and property eligibility with me.
- Read the second lien’s terms: forgivable or repayable, interest or none, due on sale or refinance.
- Get first-mortgage quotes with and without assistance and compare the rate difference.
The common mistake is ignoring repayment terms or the slightly higher first-mortgage rate because the cash savings look attractive. Use one program, confirmed in writing. What to measure: cash to close with and without DPA, and the five-year total cost including any repayment.
6. Homes for Heroes Savings
Homes for Heroes is not a loan. It is a savings layer for eligible teachers, first responders, healthcare workers, and military members that sits on top of whichever loan program you choose. Because it adds to a standard quote, the mistake to avoid is comparing a savings-adjusted quote against unadjusted ones. I will confirm the actual savings structure and your eligibility before any dollar amount is promised.
Labelled illustration, with a placeholder for arithmetic only: an eligible nurse buys a $300,000 home with FHA financing, and the Loan Estimate shows $9,000 of closing costs. If the program savings are $1,000, net closing costs are $8,000 and cash to close falls from $19,500 to $18,500. The actual savings will differ, and that is exactly why the number should come from the program rules, not from this example.
The steps:
- Confirm that your profession qualifies.
- Register through the program before you go under contract, so the savings can be reflected in your numbers.
- Ask that every quote be shown both ways, with and without the savings, so the comparison is consistent.
The common mistake is treating it as a standalone product or comparing some quotes with the savings and others without. Apply it uniformly or not at all. What to measure: net closing costs on the Loan Estimate after the savings are applied. The savings should appear as a visible line item you can trace, not as a vague promise.
7. Compare Quotes With a Soft Pull Before Choosing
Most buyers get one quote because they fear that shopping hurts their credit. A hard inquiry is a credit check that appears on your report and can nick your score. A soft pull is a review that does not. As a soft pull mortgage broker with access to hundreds of wholesale lenders, I use a NoTouch Credit Pull to run a no hard inquiry mortgage pre-approval review and price FHA, conventional, and DPA-paired structures together. That is a mortgage pre-approval without hard pull, a no credit hit mortgage application step you can take before any commitment. The CFPB advises shopping multiple mortgage providers, and credit scoring models generally count mortgage inquiries made in a short window as one. The window varies by model, commonly 14 to 45 days.
Labelled illustration: one borrower, one $300,000 home, one soft credit pull. All figures are hypothetical, and payments exclude taxes and homeowners insurance.
- FHA: 3.5% down, 6.25%, 30-year, upfront MIP $5,066.25 financed, annual MIP about $132.69 a month, cash to close about $19,500, payment about $1,946.
- Conventional 3% down: 6.25%, 30-year, no upfront fee, PMI about $145.50 a month, cash to close about $18,000, payment about $1,937.
- FHA with DPA: 6.50%, 30-year, same financed upfront MIP, annual MIP about $132.69 a month, cash to close about $13,500, payment about $1,995.
- VA (eligible borrower): 6.0%, 30-year, 2.15% funding fee of $6,450 financed, no monthly mortgage insurance, cash to close about $9,000, payment about $1,837.
- USDA (eligible area and income): 6.25%, 30-year, 1.00% fee of $3,000 financed, annual fee about $88.38 a month, cash to close about $9,000, payment about $1,954.
Line the Loan Estimates up and compare APR, fees, mortgage insurance, and cash to close. You can also pull retail quotes from Rocket Mortgage, Movement Mortgage, or NFM Lending and put them into the same grid. Request quotes within a single short window, and never compare rate alone.
What to measure: the spread between your highest and lowest total cost across the quotes, plus the number of hard inquiries made, which should be zero until you choose.
Eight Quick Answers on Lower-Cost Mortgage Options
What are the top mortgage options for homebuyers who want a lower cost of entry?
The top options are FHA, 3%-down conventional, VA, USDA, and down payment assistance, with Homes for Heroes savings layered on if you qualify. Which wins depends on your eligibility, credit score, and how long you plan to keep the loan.
Do you need 20% down to buy a home?
No. FHA allows 3.5% down, conventional programs allow 3%, and VA and USDA can allow no down payment for eligible borrowers. Putting less down generally means paying mortgage insurance or a funding fee.
Is FHA only for borrowers with bad credit?
No. FHA accepts scores as low as 580 for the 3.5% down payment, but borrowers with strong credit use it too. Compare it with conventional PMI at your actual score, because stronger scores often make conventional cheaper.
Does USDA only apply to farms?
No. USDA eligibility is tied to the property’s location on the official map and to household income, not to farming. Check the address on the USDA eligibility map, since some suburban-edge areas qualify.
Does comparing mortgage quotes hurt your credit?
Not if you do it correctly. The CFPB encourages shopping, and scoring models generally treat mortgage inquiries within a short window as one. Starting with a soft pull avoids the question until you pick a loan.
When can PMI be removed?
You can request PMI cancellation at 80% of the original value, and it ends automatically at 78% on schedule. On a $300,000 home, that is balances of $240,000 and $234,000.
How do you confirm VA eligibility?
You obtain a Certificate of Eligibility, which I can often pull electronically with your Social Security number and date of birth. Confirm funding fee status at the same time.
How does Shop Mortgage Rates by Duane Buziak compare without a hard inquiry?
Duane Buziak, a broker licensed in VA, FL, TN, GA, DC, NC, SC, and MD, starts with a NoTouch Credit Pull and prices programs side by side from hundreds of wholesale lenders. No hard inquiry is made until you choose to move forward.
Where to Start: Eligibility First, Live Quotes Last
Do the eligibility checks first, because they cost nothing and can remove entire categories. Check VA and USDA before anything else, since zero down beats every other structure when you qualify. Then compare FHA against 3%-down conventional with the same total-cost worksheet used above: cash to close, monthly payment, mortgage insurance duration, and a five-year view. Layer on down payment assistance and Homes for Heroes savings next, once you know which first mortgage they attach to. Finish with live Loan Estimates from a soft pull comparison, so the numbers you decide on are real, not illustrative.
Your dream home is within reach, discover how much you could save with personalized mortgage rates tailored to your unique situation. Securely pre-qualify in minutes with no impact to your credit score and compare competitive offers from trusted lenders who are ready to help you save. Shop Mortgage Rates by Duane Buziak puts every option side by side before you commit.