How to Buy a Home With No Down Payment

You can buy a home without saving a down payment, but the path depends on who you are and what you may have access to for

No down payment does not mean no money out of pocket — you will still pay closing costs, inspections, and appraisal fees, which typically run 2 to 5 percent of the purchase price. But several real programs let you finance 100 percent of the home's price itself. The main routes are VA loans (for military members and veterans), USDA loans (for rural and some suburban buyers), conventional loans with lender credits, and state and local down payment assistance programs. Each has different income limits, property requirements, and credit score thresholds. The fastest way to learn which ones you might use is to talk to a mortgage lender who works with all four — they can run your numbers in one conversation.

Key Takeaways

• VA loans and USDA loans are the most common no-down-payment paths, but VA loans require military service and USDA loans require the property to be in a may have access to rural or suburban area.
• Lender credits are a negotiation tool: a lender pays some of your closing costs in exchange for you accepting a higher interest rate, which can free up cash for a down payment or let you avoid one entirely.
• State and local down payment assistance programs exist in most places but have income caps, purchase price limits, and sometimes require you to take a homebuyer education course first.
• Closing costs and fees (typically 2 to 5 percent of the purchase price) still come out of your pocket even with zero down, so budget for those separately.
• Your credit score, debt-to-income ratio, and employment history matter more when you have no down payment, because the lender has no equity cushion if you default.

VA loans: zero down if you served

If you are a current or former member of the military, a VA loan is usually your simplest path to buying without a down payment. The U.S. Department of Veterans Affairs guarantees a portion of the loan to the lender, which removes the lender's risk and eliminates the need for a down payment or private mortgage insurance (PMI). You will need a Certificate of may be able to access from the VA, which you can request online through VA.gov or through your lender.

VA loans do charge a funding fee (typically 1.4 to 3.6 percent of the loan amount, depending on your service branch and whether you have a disability rating), but this can be rolled into the loan itself. The interest rates on VA loans are often lower than conventional loans, which can save you thousands over the life of the mortgage. There is no income limit, no property type restriction (you can buy a single-family home, condo, or townhouse), and no credit score minimum set by the VA — though individual lenders may require a score of 580 or higher.

USDA loans: zero down in rural and suburban areas

The U.S. Department of Agriculture backs loans for buyers in designated rural and some suburban areas. Like VA loans, USDA loans require no down payment and no PMI. The property must be in a USDA-may be able to access area, which you can check by address on the USDA website before you start house hunting. The loan is limited to owner-occupied homes only — you cannot use it to buy an investment property or a vacation home.

USDA loans do have income limits that vary by county and family size. A single person in a rural county might have a limit of $60,000 to $90,000 annually, while a family of four could go higher — but these numbers change yearly and by location. You will also pay a may provide fee (typically 1 to 2 percent of the loan amount) and an annual fee (0.35 percent of the remaining balance), both of which can be rolled into the loan. Credit score requirements vary by lender but typically start at 580.

Conventional loans with lender credits

A conventional loan (one not backed by the VA or USDA) normally requires a down payment, but you can negotiate with the lender to cover some or all of your closing costs in exchange for accepting a higher interest rate. This is called a lender credit. If your closing costs are 3 percent of the purchase price and the lender credits that amount, you effectively have a zero-down purchase — you are just paying a slightly higher rate over 30 years.

The math works like this: a lender credit of 3 percent on a $300,000 home covers $9,000 in closing costs. You still need to may have access to for the full loan amount with your income and credit, and you will pay PMI because you have no equity in the home. PMI typically costs 0.5 to 1.5 percent of the loan amount annually and stays on your loan until you have paid down 20 percent of the principal. Conventional loans usually require a credit score of 620 or higher, though some lenders go lower.

State and local down payment assistance programs

Most states and many cities run programs that give grants or low-interest loans to first-time homebuyers to cover down payments and closing costs. These programs are not federal — they are funded by state housing agencies, local housing authorities, or nonprofits — so what is available depends entirely on where you live and where you want to buy. Some programs cover the full down payment and closing costs; others cover part of it and expect you to contribute something.

Income limits are common and often tie to the area median income (AMI). A program might serve households earning up to 80 percent of AMI, which in an expensive metro area might be $70,000 for a single person and $90,000 for a family of four, while in a rural area it could be $50,000 and $65,000. Many programs also require you to take a homebuyer education course, which typically lasts 4 to 8 hours and covers budgeting, credit, and the home-buying process. Some programs have purchase price caps or restrict which neighborhoods you can buy in.

To find programs in your area, start with your state housing finance agency (search "[your state] housing finance agency") or call 211 and ask for down payment assistance. Local nonprofits like NeighborWorks and community development corporations often administer these programs and can tell you which ones are currently open and what you need to bring to apply.

What lenders look for when there is no down payment

When you have no down payment, the lender has no equity cushion — if you default, they lose money immediately. This means they scrutinize your credit score, employment history, and debt-to-income ratio more closely than they would for a buyer with 20 percent down. Most lenders want to see a credit score of at least 620 for conventional loans, though some will go to 580. They will ask for two months of recent pay stubs, two years of tax returns, and a letter from your employer confirming your job is permanent.

Your debt-to-income ratio — the total of all your monthly debt payments divided by your gross monthly income — usually cannot exceed 43 to 50 percent, depending on the loan type and lender. If you earn $5,000 a month and already pay $1,500 in car loans, credit cards, and student loans, a lender will only let your new mortgage payment be around $1,650 to $2,000. This is why getting pre-approved before you start house hunting matters: you will know exactly what price range you can afford and avoid wasting time on homes outside your reach.

Closing costs and fees you still have to pay

Even with zero down, you will owe closing costs at the time you sign the final paperwork. These typically include the appraisal (usually $400 to $600), the home inspection (usually $300 to $500), title search and insurance (usually $500 to $1,500), loan origination fees (usually 0.5 to 1 percent of the loan amount), and property taxes and homeowners insurance prorated for the closing date. Together, these usually run 2 to 5 percent of the purchase price.

On a $300,000 home, that is $6,000 to $15,000 out of pocket at closing. Some lenders will let you roll closing costs into the loan itself (which increases your monthly payment), but not all programs allow this. VA and USDA loans are more flexible about rolling costs in; conventional loans and down payment assistance programs often require you to pay at least some costs upfront. Ask your lender early what can and cannot be financed, so you know how much cash to have ready.

Frequently Asked Questions

Do I have to take a homebuyer education course?

It depends on the program. VA and USDA loans do not require one. Most state and local down payment assistance programs do, though some waive it if you have already taken one in the past two years. The course is usually free or low-cost and covers budgeting, credit, and what to expect during closing. Many nonprofits offer them online.

What if I have bad credit or no credit history?

VA loans have no credit score minimum set by the VA itself, though individual lenders typically want 580 or higher. USDA loans usually start at 580. Conventional loans with lender credits typically require 620 or higher. If your score is below these thresholds, you may need to wait and build credit, or look for a credit-builder loan or secured credit card to boost your score before applying.

Can I use a down payment assistance program with a VA or USDA loan?

Some programs allow it, but many do not because VA and USDA loans already have no down payment. A few programs will help with closing costs even if you are using VA or USDA financing. Ask the program administrator before you apply whether they work with these loan types.

What happens if I cannot afford closing costs even with a lender credit?

Some lenders will roll closing costs into the loan itself, which increases your monthly payment but means you do not need cash at closing. This is more common with VA and USDA loans than conventional loans. Ask your lender whether they offer this option and what the trade-off is in terms of your monthly payment and total interest paid.

Do I have to buy PMI if I have no down payment on a conventional loan?

Yes, PMI is required on any conventional loan with less than 20 percent down. It typically costs 0.5 to 1.5 percent of the loan amount per year and stays on your loan until you have paid down to 80 percent of the original purchase price. You can remove it sooner by refinancing once your home value rises or you pay down the principal faster.