How to Buy a Home With No Down Payment
What zero-down mortgages actually are and who offers them
A zero-down mortgage lets you borrow the full purchase price of a home without putting money down upfront. You still pay closing costs (usually 2 to 5 percent of the loan amount), but the down payment itself—the chunk of cash traditionally required before you could borrow—is not required. The lender covers the full property value, and you begin repaying immediately.
Three types of lenders offer these mortgages: the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA). Each has different rules about who can borrow, what property types may have access to, and what you pay in return for putting nothing down. Conventional lenders—banks and mortgage companies lending their own money—almost never offer true zero-down mortgages, though some offer 3 percent down with help from down payment assistance programs.
The tradeoff for no down payment is always higher cost elsewhere: a larger loan amount, higher interest rates, or mandatory mortgage insurance that protects the lender if you stop paying. Understanding which program fits your situation means knowing what you may have access to for and what that qualification actually costs over time.
Key Takeaways
- FHA loans require a 3.5 percent down payment minimum, not zero, but accept lower credit scores and are the most common path for first-time buyers without savings.
- VA loans are truly zero-down but only for active-duty military, veterans, and some surviving spouses—you must have a Certificate of may be able to access from the VA.
- USDA loans are zero-down for rural properties and require no military service, but your household income cannot exceed 115 percent of the area median income.
- All three programs charge insurance or funding fees that increase your loan amount or monthly payment, offsetting the benefit of no down payment.
- Closing costs (2 to 5 percent of the loan) are still your responsibility unless the seller or lender covers them as part of negotiation.
FHA loans: the most common option, but not truly zero-down
FHA loans require a minimum 3.5 percent down payment, so they are not zero-down in the strict sense. However, they are the closest option for most buyers without savings, because the down payment can come from a gift (from family, nonprofit, or government program) rather than your own funds. If you have $0 saved, you can still borrow if someone gives you that 3.5 percent.
FHA loans accept credit scores as low as 580 (some lenders go lower) and allow debt-to-income ratios up to 50 percent, meaning you can carry more existing debt and still borrow. The catch is mortgage insurance: you pay an upfront premium (1.75 percent of the loan, added to what you owe) plus an annual premium (0.55 to 0.80 percent of the loan, split into monthly payments). On a $300,000 loan, that upfront premium alone is $5,250 added to your debt.
FHA loans work for single-family homes, condos, townhouses, and multi-unit properties up to four units. The property must be your primary residence. You can refinance later to remove the mortgage insurance once you have built equity, but you must wait at least two years and have a credit score of at least 620.
VA loans: zero-down for military and veterans
VA loans are the only truly zero-down mortgage with no minimum down payment required. You pay no mortgage insurance, which saves thousands over the life of the loan compared to FHA. However, you must be an active-duty service member, a veteran, or a surviving spouse of someone who died in service or from a service-related injury.
To borrow, you need a Certificate of may be able to access from the VA, which you request through the VA website or by mail. The process takes a few days to a few weeks. Once you have it, any VA-approved lender can process your mortgage. You do pay a one-time funding fee (1.4 to 3.6 percent of the loan, depending on your military branch and whether you have used VA benefits before), but this can be rolled into the loan amount rather than paid upfront.
VA loans have no income limit, no credit score minimum (though lenders typically require 620 or higher), and no mortgage insurance requirement. The property must be your primary residence. You can use VA benefits multiple times in your lifetime, though only one loan can be active at a time.
USDA loans: zero-down for rural and small-town properties
USDA loans are zero-down mortgages for properties in rural areas and small towns, defined by the USDA as places with populations under 35,000. You do not need to work in agriculture or own farmland—the program is open to any borrower buying a home in a may have access to location. The USDA website has a property may be able to access map where you can enter an address and see if it qualifies.
Household income cannot exceed 115 percent of the area median income for your county. For a family of four in a rural area, this might be $85,000 to $110,000 depending on location; the USDA publishes income limits by county each year. You must be a U.S. citizen or permanent resident and have a credit score of at least 580 (some lenders require 640).
Like FHA and VA loans, USDA loans charge a may provide fee: 2 percent upfront (added to the loan) plus 0.35 percent annually (split into monthly payments). On a $250,000 loan, the upfront fee is $5,000. The property must be your primary residence, and you cannot use USDA loans to buy investment properties or vacation homes.
How closing costs work when you put nothing down
Closing costs are the fees charged by the lender, title company, appraiser, and other parties involved in the mortgage process. They typically run 2 to 5 percent of the loan amount and are separate from the down payment. On a $300,000 home, closing costs might be $6,000 to $15,000.
When you have no down payment, you still owe closing costs unless someone else pays them. Your options are: pay them out of pocket at closing, ask the seller to cover them as part of the purchase negotiation, ask the lender to roll them into the loan (increasing what you owe), or use a down payment assistance program that covers closing costs as well. Some programs do both—they cover the down payment and closing costs together.
If you roll closing costs into the loan, you pay interest on them for 15 or 30 years. A $10,000 closing cost rolled into a 30-year mortgage at 7 percent interest costs roughly $23,500 by the time you finish paying. Negotiating with the seller to cover them, or finding a program that pays them, saves significant money.
Credit score and debt requirements for zero-down loans
Each program has different credit and debt rules. FHA accepts scores as low as 580 and allows debt-to-income ratios up to 50 percent. VA loans have no official credit minimum (though lenders typically require 620) and no debt-to-income cap, though lenders may set their own limits. USDA loans require a minimum score of 580 (some lenders 640) and allow debt-to-income ratios up to 41 to 43 percent depending on the lender.
Debt-to-income ratio means your total monthly debt payments (car loans, credit cards, student loans, child support, plus the new mortgage) divided by your gross monthly income. If you earn $5,000 per month and have $1,500 in existing debt payments, a new mortgage payment of $1,500 would put you at 60 percent debt-to-income, which exceeds most limits. Paying down existing debt before applying improves your chances.
Your credit score affects the interest rate you receive. A score of 620 might get you 7.5 percent interest, while 740 might get 6.8 percent. Over 30 years on a $300,000 loan, that 0.7 percent difference costs roughly $60,000 more in interest. If your score is below 620, focus on paying down debt and correcting errors on your credit report before applying.
Comparing the three programs side by side
| Program | Down Payment | Who Qualifies | Credit Score Minimum | Insurance or Fee |
|---|---|---|---|---|
| FHA | 3.5% (can be a gift) | Any U.S. citizen or permanent resident | 580 (some lenders lower) | 1.75% upfront + 0.55–0.80% annual mortgage insurance |
| VA | 0% | Active-duty, veterans, surviving spouses | No official minimum (lenders typically 620) | 1.4–3.6% funding fee (rolled into loan) |
| USDA | 0% | Rural property buyers; income limit 115% of area median | 580 (some lenders 640) | 2% upfront + 0.35% annual may provide fee |
What happens after you are approved: the timeline and next steps
Once you find a home and make an offer, the lender orders an appraisal to confirm the property is worth what you are paying. If the appraisal comes in low, you may need to renegotiate the price, put more money down, or walk away. This step takes 7 to 10 days.
Next is underwriting, where the lender verifies your income, employment, assets, and debts. They request recent pay stubs, tax returns, bank statements, and explanations for any unusual activity on your credit report. This phase takes 3 to 5 business days if everything is in order, longer if documents are missing or inconsistent. Be prepared to provide explanations in writing for any late payments, collections, or gaps in employment.
Once underwriting approves you, you move to closing, where you sign the final paperwork and transfer funds. The lender issues a clear-to-close notice, and closing typically happens within 3 to 7 days. You will receive a Closing Disclosure document at least three business days before closing; review it carefully to confirm the loan amount, interest rate, and monthly payment match what you agreed to.
Frequently Asked Questions
Can I use a down payment assistance program to cover the FHA down payment?
Yes. Many nonprofits, state housing agencies, and some lenders offer down payment assistance grants or forgivable loans that can cover the 3.5 percent FHA requirement. Search your state housing finance agency website or contact your local housing authority to learn what programs exist in your area. Some have income limits; others do not.
What if I have bad credit but want a zero-down mortgage?
FHA and USDA loans accept credit scores as low as 580, and VA loans have no official minimum. However, a lower score means a higher interest rate, which costs thousands more over time. Before applying, spend 3 to 6 months paying down debt and correcting errors on your credit report. Raising your score by 50 to 100 points can lower your interest rate by 0.5 to 1 percent.
Can I use a zero-down loan to buy an investment property or second home?
No. FHA, VA, and USDA loans all require the property to be your primary residence—the home where you live most of the year. You cannot use them for rental properties, vacation homes, or investment purchases. If you want to buy a second property, you must use a conventional mortgage and put money down.
What if the appraisal comes in lower than the purchase price?
The lender will only finance up to the appraised value. If you agreed to pay $300,000 but the appraisal is $280,000, you have three options: renegotiate the price down with the seller, pay the $20,000 difference out of pocket, or walk away. With zero-down loans, you have no equity cushion, so a low appraisal is a real problem.
Can I refinance out of mortgage insurance after I buy?
FHA loans allow refinancing to remove mortgage insurance after two years if you have built 20 percent equity (through payments or home appreciation) and your credit score is at least 620. VA and USDA loans have no mortgage insurance, so there is nothing to remove. If you refinance to a conventional loan, you will need to meet conventional lending standards, which usually means a credit score of 620 or higher and a debt-to-income ratio under 43 percent.