How to Buy a House With No Money Down
What "no down payment" actually means
A no-down-payment mortgage means the lender finances 100% of the home's purchase price, and you contribute nothing upfront. You still pay closing costs—typically 2% to 5% of the loan amount—which cover appraisals, title insurance, inspections, and lender fees. Some programs roll closing costs into the loan itself, but most require you to pay them out of pocket or negotiate with the seller to cover them.
No-down-payment loans exist, but they are not common and come with real trade-offs. Your monthly payment will be higher because you are borrowing more. Your interest rate is usually higher because the lender takes on more risk. And you will pay mortgage insurance—a monthly fee that protects the lender if you stop paying. These costs add up over 30 years.
Key Takeaways
- VA loans and USDA loans are the most straightforward no-down-payment paths; VA loans are for military members and veterans, and USDA loans are for rural properties and borrowers with moderate income.
- Conventional loans with no down payment exist but require strong credit (usually 680 or higher), stable income, and mortgage insurance that increases your monthly cost.
- State and local down-payment assistance programs can cover part or all of your down payment, but they have income limits, property-price caps, and sometimes require you to take a homebuyer education course.
- Closing costs are separate from the down payment and typically run 2% to 5% of the loan amount; some programs roll them into the loan, but most require you to pay them.
- Your total monthly housing payment—mortgage, insurance, taxes, and mortgage insurance—must not exceed 43% to 50% of your gross monthly income, which limits how much you can borrow.
VA loans: no down payment if you served
A VA loan is backed by the U.S. Department of Veterans Affairs and requires no down payment if you are a current or former military member, National Guard member, or surviving spouse of someone who died in service or from a service-related injury. You must have a Certificate of may be able to access, which you can order online from the VA website or through your lender.
VA loans have no mortgage insurance, which saves you hundreds of dollars per month compared to conventional loans. The interest rate is often lower than conventional rates. You pay a one-time funding fee (usually 1.4% to 3.6% of the loan amount) that the VA collects to offset the cost of the program; this fee can be rolled into the loan or paid upfront.
The catch: you must use a VA-approved lender, and the property must be your primary residence. The lender will order a VA appraisal to confirm the home is worth the price you agreed to pay. If the appraisal comes in low, you either renegotiate the price or walk away—the VA will not lend more than the appraised value.
USDA loans: no down payment for rural and moderate-income buyers
A USDA loan is backed by the U.S. Department of Agriculture and requires no down payment if you are buying a home in a rural area and your household income does not exceed 115% of the area median income. The USDA website has a map where you can check whether your target property qualifies as rural.
USDA loans have no mortgage insurance in the traditional sense, but you pay a may provide fee—1% upfront and 0.35% annually—that protects the lender. Like VA loans, this fee can be rolled into the loan. The interest rate is competitive, and the program is designed for first-time buyers and repeat buyers alike.
You must use a USDA-approved lender and occupy the home as your primary residence. The property must meet USDA standards for safety and livability. If you have unpaid federal debts or recent bankruptcy, you may be ineligible. Income limits vary by county, so check your specific area before you start house hunting.
Conventional loans with no down payment
Some conventional lenders offer 100% financing, but the requirements are strict. You typically need a credit score of 680 or higher, a debt-to-income ratio below 43%, and documented income that is stable and verifiable. Self-employed borrowers face extra scrutiny and usually need two years of tax returns.
You will pay mortgage insurance every month—usually 0.5% to 1.5% of the loan amount annually, divided into 12 payments. This insurance stays on your loan until you have built 20% equity through payments and home appreciation, which can take 10 to 15 years. Over the life of the loan, mortgage insurance can cost tens of thousands of dollars.
Interest rates on no-down-payment conventional loans run 0.5% to 1% higher than rates for loans with a 20% down payment. The combination of higher interest, higher monthly payment, and mortgage insurance makes these loans expensive. They make sense only if you have the income to absorb the cost and you expect to stay in the home long enough to build equity.
Down-payment assistance programs from states and cities
Many states and cities offer grants or forgivable loans that cover part or all of your down payment. These programs have different names—down-payment assistance, homebuyer grants, first-time homebuyer programs—but they work the same way: the government or a nonprofit gives you money to put down, and you use a conventional or government-backed mortgage for the rest.
Income limits are common. A program might cap household income at 80% of the area median income, which in an expensive city might be $60,000 to $80,000 per year. Property-price caps also apply: a program might limit the purchase price to $350,000 or $400,000. Some programs require you to complete a homebuyer education course, which teaches budgeting, credit, and the mortgage process.
Funds run out. Many programs have a fixed budget and close when the money is spent. Some reopen the next fiscal year; others do not. Contact your city or county housing authority or call 211 to find out which programs are currently open in your area and whether you meet the income and property requirements.
Forgivable loans are common in these programs. You borrow the down-payment money interest-free, and the debt is forgiven if you stay in the home for a set period—usually 5 to 10 years. If you sell or refinance before the forgiveness period ends, you owe the full amount back.
How to compare the total cost of each option
Do not compare loans by interest rate alone. A no-down-payment loan costs more because you are borrowing more money, paying mortgage insurance, and often paying a higher rate. Use a mortgage calculator to run the numbers for each option you may have access to for.
For a $300,000 home, compare these scenarios: a conventional loan with 20% down ($60,000), a conventional loan with no down payment and mortgage insurance, a VA loan with no down payment, and a down-payment assistance program that covers the down payment. Plug in the interest rate, mortgage insurance cost, property taxes, and homeowners insurance for your area. The total monthly payment will surprise you.
Remember that a lower monthly payment does not mean lower total cost. A no-down-payment loan that costs $200 more per month than a 20% down loan will cost $72,000 more over 30 years. If you have savings, putting down 5% or 10% and keeping the rest in an emergency fund is often smarter than borrowing 100%.
What lenders look for when you have no down payment
Without a down payment, lenders scrutinize everything else. They want to see a credit score of 640 or higher (VA and USDA loans have lower minimums, around 580 to 620). They want to see two years of stable employment or income. They want to see a debt-to-income ratio below 43%, which means your total monthly debt payments—car loans, credit cards, student loans, plus the new mortgage—cannot exceed 43% of your gross monthly income.
Lenders also want to see cash reserves. Even though you have no down payment, they want proof that you have savings equal to two to six months of mortgage payments. This shows you can handle an emergency without defaulting. If you do not have reserves, some programs will accept a co-signer or a gift letter from a family member (though the gift cannot come with strings attached or an expectation of repayment).
Your employment history matters. Gaps in work, frequent job changes, or recent career switches raise red flags. If you changed jobs in the last 90 days, some lenders will not approve you until you have been in the new job for 90 days. Self-employed borrowers need two years of tax returns and a CPA letter confirming income stability.
Frequently Asked Questions
Can I get a no-down-payment loan if I have bad credit?
VA and USDA loans accept credit scores as low as 580 to 620. Conventional lenders usually require 640 or higher. If your score is below 620, focus on VA or USDA loans if you may have access to, or spend 6 to 12 months paying down debt and disputing errors on your credit report before applying for a conventional loan.
What if I do not have money for closing costs?
Some lenders will roll closing costs into the loan, which means you borrow the money and pay it back over 30 years. This increases your monthly payment and total interest paid. Others allow the seller to pay your closing costs as part of the negotiation. Ask your lender which options are available before you make an offer.
Do I have to stay in the home for a certain time?
VA and USDA loans have no occupancy requirement after purchase. Down-payment assistance programs often require you to stay in the home for 5 to 10 years; if you sell or refinance early, you owe the assistance money back. Check the terms of your specific program before you sign.
What happens if the home appraises for less than the purchase price?
The lender will not lend more than the appraised value. You can renegotiate the price with the seller, pay the difference out of pocket, or walk away. With no down payment, you have no cushion, so a low appraisal can kill the deal.
Is a no-down-payment loan a good idea if I have savings?
Usually not. If you have $30,000 saved, putting 10% down and keeping $20,000 in reserves is smarter than borrowing 100% and paying mortgage insurance for 10 to 15 years. Run the numbers with a calculator to see the difference in total cost.