How to Buy a House With Little or No Money Down

What zero-down and low-down mortgages actually are

A zero-down or low-down mortgage means you borrow the full purchase price (or nearly all of it) instead of putting cash into the deal upfront. The lender covers what you don't pay at closing. This is possible because certain loan programs—mainly VA loans, USDA loans, and some FHA loans—were designed to let borrowers with little savings still buy a home. Conventional loans from banks and mortgage companies typically require at least 3 to 5 percent down, though some go lower.

The catch is real: when you put down less money, the lender takes on more risk. That risk shows up as a higher interest rate, a monthly mortgage insurance payment, or both. You will also owe the full purchase price plus interest over 15, 20, or 30 years. A zero-down purchase is not assistance programs—it is a loan for the entire home value, and you pay for that privilege.

Key Takeaways

• VA loans (for military members and veterans) and USDA loans (for rural homebuyers) offer zero-down mortgages; FHA loans typically require 3.5 percent down but accept lower credit scores and higher debt ratios than conventional loans.
• You must still have a steady income, acceptable credit, and enough cash reserves to cover closing costs, property taxes, and insurance—lenders will not finance those.
• Mortgage insurance (PMI on conventional loans, MIP on FHA loans) adds $100 to $300+ per month and stays on your loan until you build equity or refinance.
• The interest rate on a low-down loan is usually higher than on a 20 percent down loan, meaning you pay more over the life of the mortgage.
• Your debt-to-income ratio—how much you already owe divided by your gross monthly income—must fall within the lender's limits, usually 43 to 50 percent.

VA loans: zero down for military members and veterans

If you served on active duty, in the reserves, or in the National Guard, you may be able to use a VA loan through the U.S. Department of Veterans Affairs. VA loans require zero down payment and no mortgage insurance. The lender is protected by a government may provide, which means the VA promises to cover part of the loss if you stop paying.

To use a VA loan, you need a Certificate of may be able to access from the VA, which you can order online at VA.gov or through your lender. You will also need a valid ID, proof of income (recent pay stubs and tax returns), and a credit score of at least 580 to 620, depending on the lender. The VA does not set a minimum credit score, but individual lenders do.

VA loans come with a one-time funding fee (usually 2 to 3.6 percent of the loan amount) that you can roll into the mortgage instead of paying upfront. The interest rate is typically lower than conventional loans because the government may provide reduces the lender's risk. You can use a VA loan only once at a time, but you can reuse your may be able to access after you sell the home and pay off the loan.

USDA loans: zero down for rural and suburban homebuyers

The U.S. Department of Agriculture offers mortgages with zero down payment for homebuyers in rural and some suburban areas. The property must be in an may be able to access area—you can check the USDA may be able to access map on the USDA Rural Development website. The loan is backed by the USDA, similar to how the VA backs VA loans.

USDA loans require a steady income, a credit score of at least 580 to 640 (depending on the lender), and a debt-to-income ratio below 41 to 43 percent. You cannot have received a USDA loan in the past three years. Like VA loans, USDA loans include a may provide fee (usually 1 to 2 percent) that you can roll into the mortgage, and they carry mortgage insurance (called a may provide fee) for the life of the loan.

The interest rate on USDA loans is often competitive with or lower than conventional loans. The main limitation is geography: if your target property is in an urban or densely suburban area, you will not may have access to. Check the map before you fall in love with a house.

FHA loans: 3.5 percent down with flexible credit requirements

FHA loans, insured by the Federal Housing Administration, require a minimum down payment of 3.5 percent. That is not zero, but it is the lowest down payment most first-time homebuyers can find on a conventional loan. FHA loans accept credit scores as low as 500 to 580 and allow debt-to-income ratios up to 50 percent, making them more forgiving than conventional mortgages.

The tradeoff is mortgage insurance. FHA loans require both an upfront mortgage insurance premium (usually 1.75 percent of the loan amount, rolled into the mortgage) and an annual mortgage insurance premium (0.55 to 0.8 percent per year, added to your monthly payment). That insurance stays on the loan for the full term unless you eventually refinance into a conventional loan with 20 percent equity.

FHA loans work in any area and on any property type, as long as it is your primary residence. You can use an FHA loan multiple times, though you can hold only one at a time. The interest rate is usually higher than on a VA or USDA loan but comparable to a conventional loan with a small down payment.

Conventional loans with 3 to 5 percent down

Some conventional lenders offer mortgages with 3 to 5 percent down, though these are less common than they were before 2008. You will need a credit score of at least 620 to 680, a debt-to-income ratio below 43 percent, and cash reserves (usually equal to two to three months of mortgage payments). The down payment must come from your own savings; lenders do not allow gifts for the full amount, though some allow gifts to cover part of it.

Conventional loans with low down payments require mortgage insurance (PMI), which typically costs 0.5 to 1.5 percent of the loan amount per year. PMI can be removed once you reach 20 percent equity in the home, either through payments or a rise in home value. The interest rate is usually lower than on FHA loans but higher than on VA or USDA loans.

What you still have to pay upfront, even with zero down

Zero down does not mean zero cost at closing. You will still owe closing costs, which typically run 2 to 5 percent of the purchase price and include appraisal fees, title insurance, attorney fees, and lender fees. Some loan programs allow the seller to cover part or all of the closing costs, but that is negotiated as part of the purchase agreement and is not may provide.

You will also need to pay for a home inspection (usually $300 to $500), property taxes (varies by location and paid at closing), homeowners insurance (required by all lenders, usually $800 to $2,000 per year), and possibly HOA fees if the property is in a planned community. Some lenders allow you to roll closing costs into the mortgage, but that increases the total amount you borrow and the interest you pay over time.

Before you apply, make sure you have cash set aside for these costs. Lenders will ask for proof of funds and will not finance them as part of the mortgage.

How mortgage insurance works and what it costs

When you put down less than 20 percent, the lender requires mortgage insurance to protect themselves if you default. On conventional loans, this is called PMI (private mortgage insurance). On FHA loans, it is called MIP (mortgage insurance premium). On VA and USDA loans, it is called a may provide fee or funding fee.

Mortgage insurance is not optional—it is a condition of the loan. On a conventional loan, PMI typically costs 0.5 to 1.5 percent of the loan amount per year, paid as part of your monthly mortgage payment. On an FHA loan, you pay an upfront premium (1.75 percent) plus an annual premium (0.55 to 0.8 percent per year). On a VA loan, you pay a one-time funding fee (2 to 3.6 percent) with no annual insurance. On a USDA loan, you pay a may provide fee (1 to 2 percent upfront plus 0.35 percent annually).

For a $250,000 loan with PMI at 1 percent per year, you would pay about $208 per month in insurance alone. That money does not build equity; it only protects the lender. PMI can be removed from a conventional loan once you reach 20 percent equity, but you must request it—the lender will not remove it automatically. FHA mortgage insurance stays for the life of the loan unless you refinance.

Income, credit, and debt requirements

Every lender will check your income, credit history, and existing debt before approving a mortgage. Even with a zero-down program, you must show that you can afford the monthly payment plus property taxes, insurance, and HOA fees.

Lenders use a debt-to-income ratio to decide how much you can borrow. This is your total monthly debt payments (car loans, credit cards, student loans, child support, and the new mortgage) divided by your gross monthly income. Most lenders want this ratio below 43 percent; some go up to 50 percent for VA and USDA loans. If you earn $5,000 per month and already owe $1,500 in debt, you can only add about $650 in new mortgage payment (at 43 percent), which limits how much you can borrow.

Credit score requirements vary by program. VA loans have no federal minimum but most lenders require 580 to 620. USDA loans typically require 580 to 640. FHA loans accept scores as low as 500 to 580. Conventional loans usually require 620 to 680. A lower credit score does not disqualify you, but it will raise your interest rate.

You will also need to show proof of income: recent pay stubs, W-2 forms, and tax returns (usually the last two years). If you are self-employed, the lender will want to see profit-and-loss statements and may ask for more documentation. If you have changed jobs recently, the lender may want a letter from your new employer confirming your position and salary.

Frequently Asked Questions

Can I get a zero-down mortgage if I have bad credit?

VA and USDA loans accept credit scores as low as 580 to 620, and FHA loans go down to 500 to 580. A lower score will raise your interest rate but will not automatically disqualify you. Conventional loans typically require 620 or higher. If your score is below 500, you may need to wait and build credit before applying, or explore FHA loans with a co-signer.

What if I cannot afford the closing costs?

Some sellers will cover closing costs as part of the purchase negotiation—ask your real estate agent whether this is common in your area. Some lenders allow you to roll closing costs into the mortgage, which increases your loan amount and total interest paid. Some nonprofits and government programs offer down payment and closing cost assistance; ask your local housing authority or 211 whether funds are available in your area.

Can I use a gift from family to cover the down payment?

VA, USDA, and FHA loans allow gift funds from family members. Conventional loans allow gifts but usually require you to put at least 3 to 5 percent of your own money down. The lender will ask for a gift letter from the family member stating that the money is a gift, not a loan. You will need to show the gift in your bank account before closing.

How much will my monthly payment be?

Your monthly payment depends on the loan amount, interest rate, loan term (15, 20, or 30 years), property taxes, homeowners insurance, and mortgage insurance. A $250,000 loan at 6.5 percent over 30 years costs about $1,580 per month in principal and interest alone. Add property taxes ($200 to $400 per month depending on location), insurance ($100 to $150 per month), and mortgage insurance ($100 to $300 per month), and your total housing payment could be $2,000 to $2,500 per month. Use an online mortgage calculator to estimate your payment based on your local rates and property taxes.

Can I refinance out of mortgage insurance later?

On a conventional loan, you can refinance into a new loan without PMI once you have 20 percent equity in the home. On an FHA loan, you can refinance into a conventional loan to remove mortgage insurance, but you will need 20 percent equity and a credit score of at least 620. Refinancing costs money (closing costs on the new loan), so calculate whether the savings in insurance payments justify the cost. VA and USDA loans do not have mortgage insurance to remove, but you can refinance to a lower interest rate if rates drop.