How to Buy a House With No Down Payment
What no-down-payment mortgages actually are
A no-down-payment mortgage means you borrow 100% of the home's purchase price instead of putting money down upfront. You still pay closing costs (typically 2% to 5% of the loan amount), but those can sometimes be rolled into the loan or covered by the seller. The lender takes on more risk because you have no equity cushion, so these loans come with higher interest rates, stricter income requirements, and mandatory mortgage insurance.
No-down-payment loans exist, but they are not common in today's market. Most lenders require at least 3% down. The programs that do offer 100% financing are usually backed by a government agency—the VA (for military veterans), the USDA (for rural properties), or FHA (Federal Housing Administration, for borrowers with lower credit scores). A few conventional lenders offer no-down options, but you will pay a steeper price in interest and fees.
Key Takeaways
- VA loans (for active military, veterans, and surviving spouses) are the most accessible no-down-payment option and carry no mortgage insurance requirement.
- USDA loans cover rural and some suburban properties and require no down payment, but you must meet income limits based on your county.
- FHA loans allow 3.5% down (not zero), but some lenders will gift or finance that amount, effectively making it zero out of pocket.
- Closing costs still apply and typically range from $8,000 to $15,000 on a $200,000 home; ask whether the seller or lender will cover them.
- Your debt-to-income ratio, credit score, and employment history matter more without a down payment, because the lender has no equity buffer.
VA loans: the true zero-down option
If you served on active duty, are a veteran, or are a surviving spouse of a service member, you may be may be able to access for a VA loan through the U.S. Department of Veterans Affairs. VA loans require no down payment, no mortgage insurance, and typically carry lower interest rates than conventional loans. You do not need to be a first-time buyer.
To use a VA loan, you need a Certificate of may be able to access (COE), which you can request online through VA.gov, by mail, or through your lender. The VA does not lend the money directly—a bank, credit union, or mortgage company does. The VA guarantees a portion of the loan, which is why lenders feel comfortable lending without a down payment. Your credit score typically needs to be 620 or higher, though some lenders accept lower scores. Debt-to-income ratio limits vary by lender but often cap at 41% to 50%.
VA loans can be used only once at a time, but your entitlement can be reused after you sell the home and pay off the loan. If you have already used your VA benefit and still have entitlement remaining, you may be able to use it again.
USDA loans for rural and suburban homes
The U.S. Department of Agriculture offers no-down-payment loans for properties in rural areas and some suburban zones. The USDA does not lend directly; instead, it guarantees loans made by approved lenders. You must meet income limits, which vary by county—typically 115% of the area median income, though some counties allow up to 150%. A family of four in a rural county might have a limit of $85,000 to $110,000 annually, depending on location.
The property must be in an may be able to access area, which you can check on the USDA's online map. Most single-family homes in rural counties may have access to, but some suburban properties do not. USDA loans require a mandatory may provide fee (similar to mortgage insurance) that is rolled into your loan balance. Your credit score should be 640 or higher, though some lenders work with lower scores. Debt-to-income ratio limits are typically 41% to 43%.
USDA loans take longer to process than conventional loans—often 45 to 60 days—because the USDA reviews the property location and your income documentation. If you are buying in a rural area and your income is below the county limit, this is often the cheapest no-down option available.
FHA loans and down-payment assistance programs
FHA loans require a minimum 3.5% down payment, which is not zero, but many first-time buyer programs will gift or finance that amount. If you receive a gift from a family member or a grant from a nonprofit, you can use it toward the down payment. Some employers, credit unions, and state housing finance agencies offer down-payment assistance that does not need to be repaid.
FHA loans are available to borrowers with credit scores as low as 580 (though 640 or higher is more common). You can have past credit problems, including bankruptcy or foreclosure, as long as enough time has passed. FHA loans require mortgage insurance for the life of the loan if you put down less than 10%, which adds roughly $150 to $300 per month to your payment on a $200,000 loan.
To find down-payment assistance in your state, contact your state housing finance agency or search the HUD website for local programs. Many programs are income-based and may require you to complete a homebuyer education course. Some programs are forgivable loans (you do not repay them if you stay in the home for a set period), while others are grants (you never repay them).
What lenders look for without a down payment
When you have no skin in the game, lenders scrutinize everything else. Your debt-to-income ratio (total monthly debt payments divided by gross monthly income) becomes critical. Most lenders cap this at 43% to 50%, depending on the loan type and your credit profile. If you earn $5,000 per month and already pay $2,000 in car loans, credit cards, and student loans, a new mortgage payment of $1,500 would put you at 70%—too high for most lenders.
Your employment history matters more too. Lenders want to see at least two years of stable income. If you changed jobs recently, be ready to explain why and show that your new income is equal to or higher than your previous job. Self-employed borrowers need two years of tax returns and often face stricter scrutiny.
Credit score requirements are higher without a down payment. VA loans may accept 580 to 620, but conventional no-down loans often require 700 or higher. Even one missed payment in the last two years can disqualify you. Lenders also check your savings and assets—they want to see that you have reserves to cover a few months of mortgage payments if you lose income.
Closing costs and how to cover them
Even with no down payment, you owe closing costs: loan origination fees, appraisal, title search, title insurance, homeowners insurance, property taxes, and HOA fees (if applicable). On a $200,000 home, closing costs typically range from $8,000 to $15,000. You have several options to cover them without cash out of pocket.
Seller concessions: In a buyer's market, you can negotiate with the seller to cover some or all closing costs. The seller pays the lender directly. Limits vary by loan type—VA loans allow up to 4% of the purchase price, USDA loans up to 6%, and FHA loans up to 6%. If the seller covers $10,000 in closing costs on a $200,000 home, that is within the limit for most programs.
Lender credits: Some lenders will credit you at closing in exchange for a higher interest rate. If your rate would be 6.5%, the lender might offer 7.0% and give you a $5,000 credit to cover closing costs. Over the life of the loan, you pay more in interest, but you avoid the upfront cash.
Down-payment assistance programs: Some programs that cover the down payment also cover closing costs. Ask your lender or local housing authority whether a combined grant exists in your area.
Comparing your options: which loan type fits your situation
| Loan Type | Down Payment | Mortgage Insurance | Credit Score | Best For |
|---|---|---|---|---|
| VA Loan | 0% | None | 620+ | Veterans, active duty, surviving spouses |
| USDA Loan | 0% | may provide fee (built in) | 640+ | Rural/suburban homes, income-may have access to buyers |
| FHA Loan | 3.5% (can be gifted) | Yes, for life of loan | 580+ | First-time buyers, lower credit scores |
| Conventional (rare) | 0% (uncommon) | Yes | 700+ | Borrowers with strong income and credit |
Start by determining which programs you are may be able to access for. If you have military service, a VA loan is almost always the cheapest option. If you are buying in a rural area and your income is below the county limit, USDA is worth exploring. If neither applies, FHA with down-payment assistance is your most realistic path.
Frequently Asked Questions
Can I get a no-down-payment loan with bad credit?
VA loans accept credit scores as low as 580 to 620 depending on the lender. USDA loans typically require 640 or higher. FHA loans accept 580 and up. If your score is below 580, you may need to wait and rebuild credit, or look for a credit union that has looser standards. Some credit unions offer member loans with no down payment to members who have been with them for at least six months.
What if I am self-employed?
Self-employed borrowers need two years of tax returns and often face stricter income verification. Lenders average your income over two years, so if your first year was lower, it pulls down your average. Some lenders require a CPA letter confirming your income is stable or growing. VA and USDA loans have the same self-employment rules as conventional loans, so being self-employed does not disqualify you—it just means more paperwork.
Can the seller pay my closing costs?
Yes, and it is common in slower markets. The limit depends on your loan type: VA allows up to 4% of the purchase price, USDA and FHA allow up to 6%. On a $200,000 home, that is $8,000 to $12,000. Ask your real estate agent to include a closing-cost concession in your offer. If the seller agrees, the money goes directly to the lender at closing—you never see it.
Do I have to pay mortgage insurance with a VA or USDA loan?
VA loans have no mortgage insurance at all. USDA loans require a may provide fee (similar to mortgage insurance) that is rolled into your loan balance—typically 2% to 3.6% of the loan amount. FHA loans require mortgage insurance for the life of the loan if you put down less than 10%. Conventional no-down loans require mortgage insurance until you reach 20% equity.
How long does it take to close on a no-down-payment loan?
VA and FHA loans typically close in 30 to 45 days. USDA loans take longer—often 45 to 60 days—because the USDA reviews the property location and your income. Conventional loans close faster, usually 21 to 30 days. The timeline also depends on how quickly you provide documents and how busy the lender is. Ask your lender for a timeline estimate when you start the process.