How to Buy a Home With No Down Payment
What zero-down mortgages actually are and who offers them
A zero-down mortgage means you borrow 100 percent of the home's purchase price instead of putting money down upfront. The lender covers the full cost; you repay it over 15, 20, or 30 years. These loans exist, but they are not common, and the terms matter enormously.
The main sources are the U.S. Department of Veterans Affairs (VA loans), the U.S. Department of Agriculture (USDA loans) for rural properties, and some conventional lenders who offer zero-down programs to borrowers with strong credit and income. A handful of state and local programs also exist, though availability changes by location. The catch: zero-down almost always means higher interest rates, mandatory mortgage insurance, or both.
Key Takeaways
- VA loans and USDA loans are the most reliable zero-down options, but VA loans require military service and USDA loans require a rural property location.
- Conventional zero-down loans exist but typically require a credit score above 700, stable income documentation, and you will pay mortgage insurance for the life of the loan.
- Mortgage insurance on a zero-down loan costs 0.5 to 1.5 percent of the loan amount per year, added to your monthly payment.
- State and local down payment assistance programs sometimes cover the down payment instead of the lender offering zero-down, so the mechanics differ by program.
- Your total monthly payment on a zero-down loan will be higher than on the same home with a down payment, because you are borrowing more and paying insurance.
VA loans: zero-down if you served in the military
A VA loan is a mortgage backed by the Department of Veterans Affairs and offered through private lenders. If you are a veteran, active-duty service member, or surviving spouse of a service member, you may be able to borrow 100 percent of the home price with no down payment and no mortgage insurance.
To use a VA loan, you need a Certificate of may be able to access, which you request from the VA. The process takes a few days to a few weeks online. You then bring this certificate to a lender—most major banks and mortgage companies offer VA loans. The lender still checks your credit and income, but the VA may provide means they take on less risk, so approval is often easier than a conventional loan with the same financial profile.
VA loans have no mortgage insurance, which saves hundreds of dollars per month compared to a conventional zero-down loan. The interest rate is typically competitive with or better than conventional rates. The main limitation: you can only use a VA loan once at a time, though your may be able to access can be restored after you sell the home.
USDA loans: zero-down for rural and some suburban properties
The USDA Rural Development loan program offers zero-down mortgages for homes in designated rural areas and some suburban zones. You must live in the home (not rent it out), and your household income cannot exceed 115 percent of the area median income—this varies by county.
Like VA loans, USDA loans have no down payment and no mortgage insurance. The interest rate is set by the market, and the USDA may provide reduces the lender's risk. You apply through a USDA-approved lender, not directly to the USDA. The lender will verify that your property falls within an may be able to access area; you can check this on the USDA website using your address.
The main catch: USDA loans are slower to close than conventional loans, often taking 45 to 60 days. If you are in a competitive market or need to close quickly, this timeline can be a problem. Also, not all lenders offer USDA loans, so you may need to shop around.
Conventional zero-down loans and what they cost
Some conventional lenders offer zero-down mortgages to borrowers with strong credit and income. These loans require a credit score typically above 700, proof of stable employment for at least two years, and a debt-to-income ratio below 43 percent (meaning your total monthly debt payments, including the new mortgage, cannot exceed 43 percent of your gross monthly income).
The trade-off is mortgage insurance. On a conventional zero-down loan, you pay private mortgage insurance (PMI) for the entire life of the loan. This costs between 0.5 and 1.5 percent of the loan amount per year, depending on your credit score and the lender. On a $300,000 loan, that is $1,500 to $4,500 per year, or $125 to $375 per month, added to your mortgage payment.
You cannot remove PMI from a conventional zero-down loan by refinancing or paying down the principal—it stays until you sell or the loan ends. This makes the total cost of borrowing significantly higher than a loan with a down payment. Before committing to a conventional zero-down loan, compare the monthly payment to what you would pay with a 3 or 5 percent down payment, factoring in the mortgage insurance cost.
Down payment assistance programs that work differently
Some state and local programs do not offer zero-down loans themselves; instead, they give you money to cover the down payment. This is different from a zero-down mortgage. You still borrow from a conventional lender, but the assistance program covers part or all of your down payment, so you do not have to save it yourself.
These programs vary widely by state and county. Some are grants (you do not repay them), others are forgivable loans (you repay them only if you sell within a certain time), and others are second mortgages (you repay them like a regular loan). Your state housing finance agency or local housing authority can tell you what programs exist in your area. You can also search through the HUD Housing Counselor Locator to find a counselor who knows local programs.
Down payment assistance is often easier to get than a zero-down mortgage, because you still put some money down (even if it is covered by a grant) and the lender's risk is lower. However, availability depends on funding, and many programs have waiting lists or income limits.
How your monthly payment changes with zero-down
On a $300,000 home with a 7 percent interest rate and a 30-year loan, the difference is stark. With 20 percent down ($60,000), your mortgage payment is roughly $1,260 per month. With zero down, you borrow $300,000, and your payment is roughly $1,995 per month—plus mortgage insurance if it is a conventional loan, which adds another $125 to $375 per month.
This means your total housing cost (mortgage plus insurance) could be $2,120 to $2,370 per month instead of $1,260. Over 30 years, you pay tens of thousands more in interest alone. The benefit of zero-down is that you do not need to save for years; the cost is that you pay more every month for decades.
Before choosing a zero-down loan, calculate your actual monthly payment using a mortgage calculator and compare it to what you would pay if you saved for a down payment. Sometimes waiting a year or two to save 5 or 10 percent down saves you more money than borrowing zero-down immediately.
What lenders check before approving zero-down
Lenders are more cautious with zero-down loans because you have no equity in the home from day one. They will scrutinize your credit score, employment history, and debt-to-income ratio more closely than they would for a loan with a down payment.
Expect to provide recent pay stubs, tax returns for the past two years, bank statements showing your savings, and a detailed list of all debts (credit cards, car loans, student loans, child support). The lender will also order a home appraisal to confirm the property is worth what you are paying; if the appraisal comes in low, the deal may fall through or you may need to renegotiate the price.
Having a co-signer with strong credit can help if your own credit is weak, though not all lenders allow this. Some lenders also require you to complete a homebuyer education course before approval, which teaches you about budgeting, maintenance, and what to expect as a homeowner.
Frequently Asked Questions
Can I get a zero-down loan if my credit score is below 650?
VA and USDA loans have more flexible credit requirements than conventional lenders—some approve scores in the 580 to 620 range if your income and employment history are strong. Conventional zero-down loans almost always require 700 or higher. If your score is low, work on paying down existing debt and fixing errors on your credit report before applying.
What happens if the home appraises for less than the purchase price?
The lender will not lend more than the appraised value. If you agreed to pay $300,000 but the appraisal comes in at $280,000, you either need to renegotiate the price with the seller, pay the difference out of pocket, or walk away. With zero-down, you have no cushion, so this risk is real.
Can I use a zero-down loan to buy a second home or investment property?
VA and USDA loans are for primary residences only—homes you will live in. Conventional zero-down loans may be available for investment properties, but the rates are higher and the requirements stricter. Most lenders require at least 15 to 20 percent down on a rental property.
Do I have to pay mortgage insurance forever on a zero-down conventional loan?
Yes. Unlike loans with a down payment, where mortgage insurance drops off once you reach 20 percent equity, zero-down conventional loans carry PMI for the entire loan term. Refinancing into a new loan is the only way to remove it, but you would need to have built up equity or have the home appreciate significantly.
What is the difference between a zero-down loan and a down payment assistance program?
A zero-down loan means the lender finances 100 percent of the purchase price. A down payment assistance program gives you money (grant or loan) to cover your down payment, so you still borrow less from the primary lender. Assistance programs often have lower interest rates and no mortgage insurance, making them cheaper long-term if you can find one in your area.