How to Buy a Home With No Down Payment
Mortgages that require no down payment do exist, but they come with real trade-offs you need to understand before you commit.
A zero-down mortgage means the lender finances 100% of the home's purchase price. You do not put money down at closing—the loan covers everything. The most common zero-down programs are VA loans (for military members and veterans), USDA loans (for rural properties), and conventional loans with lender-paid mortgage insurance. Each has different rules about who qualifies, what properties work, and what you pay over time.
The catch is that lenders protect themselves when you have no equity in the home. They do this by charging higher interest rates, requiring mortgage insurance, or both. A zero-down loan is not cheaper than a loan with a down payment—it shifts the cost structure. You pay less upfront but more per month.
Key Takeaways
- VA loans and USDA loans are the only zero-down programs with no mortgage insurance; VA loans are for military service members and veterans, USDA loans are for rural properties in designated areas.
- Conventional zero-down mortgages exist but require mortgage insurance, which adds $100 to $300+ per month depending on the loan size and your credit score.
- Your debt-to-income ratio (all monthly debts divided by gross income) typically cannot exceed 43% to 50%, so lenders will verify your income and pull your credit report.
- Closing costs still apply even with zero down, usually 2% to 5% of the purchase price, and you will need cash for inspections, appraisals, and title work.
- A zero-down loan makes sense if you have stable income and good credit but limited savings; it does not make sense if your income is irregular or your credit is poor.
VA Loans: The Most Common Zero-Down Option
If you served on active duty, in the reserves, or in the National Guard, 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 and no mortgage insurance. The lender is protected by a government may provide—the VA promises to cover part of the loss if you default.
To use a VA loan, you need a Certificate of may be able to access from the VA, which you can request online at VA.gov or through your lender. The process takes a few days to a few weeks. You will also need a valid ID and a credit score of at least 580 (though most lenders prefer 620 or higher). There is no income minimum, but your debt-to-income ratio cannot exceed 41% for most lenders, though some allow up to 50%.
VA loans do have a funding fee—a one-time charge paid at closing, usually 1.5% to 3.3% of the loan amount depending on whether you have served before and whether you have a disability rating. This fee is rolled into your loan, so you do not pay it upfront, but you do pay interest on it over 30 years. The interest rate on VA loans is often lower than conventional loans, which can offset the funding fee over time.
USDA Loans: Zero Down for Rural Properties
The U.S. Department of Agriculture offers zero-down mortgages for homes in designated rural areas. The property must be in an may be able to access location—you can check the USDA may be able to access map on their website. The home itself must be a single-family residence; manufactured homes and multi-unit properties do not may have access to.
USDA loans require no down payment and no mortgage insurance in the traditional sense, but they do charge a may provide fee—typically 1% to 2% of the loan amount, paid at closing and rolled into the loan. Your debt-to-income ratio cannot exceed 43% for most lenders, though some allow up to 50% if you have compensating factors like savings or a co-signer.
Income limits apply: your household income cannot exceed 115% of the area median income for your county. This varies widely by location. A family of four in a rural county might have a limit of $90,000 to $120,000 depending on the state. You can check your county's limit on the USDA website. There is no credit score minimum stated by the USDA, but most lenders require 580 or higher.
Conventional Loans With No Down Payment
Some conventional lenders offer zero-down mortgages to borrowers with good credit and stable income. These loans require private mortgage insurance (PMI), which protects the lender if you default. PMI typically costs 0.5% to 1.5% of the loan amount per year, paid monthly as part of your mortgage payment.
On a $300,000 loan, PMI might add $125 to $375 per month. You pay this for as long as you carry the loan, unless you later refinance or build equity through home appreciation. Some lenders allow you to remove PMI once you reach 20% equity, but this requires a new appraisal and is not automatic.
Conventional zero-down loans usually require a credit score of 620 or higher, a debt-to-income ratio of 43% or lower, and proof of stable income for the past two years. Self-employed borrowers face stricter documentation—usually two years of tax returns and profit-and-loss statements. Down payment assistance programs sometimes pair with conventional loans, covering the down payment while you take out the mortgage for the rest.
What You Still Pay at Closing Without a Down Payment
Zero down does not mean zero cost at closing. You will still owe closing costs, which typically run 2% to 5% of the purchase price. On a $300,000 home, that is $6,000 to $15,000. Closing costs include the appraisal (usually $400 to $600), title search and insurance ($800 to $1,200), loan origination fees, and property taxes and homeowners insurance prorated to your closing date.
Some lenders allow you to roll closing costs into the loan, which means you finance them instead of paying cash. This increases your total loan amount and the interest you pay over time, but it means you need less cash on hand at closing. Ask your lender whether they offer this option and what it costs in additional interest.
You will also need cash for a home inspection (typically $300 to $500), which is separate from the appraisal and is not required by the lender but is strongly recommended. If the inspection finds problems, you may negotiate repairs or credits with the seller, which can reduce your out-of-pocket costs.
Credit Score and Income Requirements Vary by Program
VA loans have no stated credit score minimum from the VA itself, but most lenders require 580 to 620. Income is not capped, but your debt-to-income ratio is usually limited to 41%, with some lenders allowing 50%. You must have a Certificate of may be able to access and a valid ID.
USDA loans require a credit score of 580 or higher at most lenders, and your household income cannot exceed 115% of the area median for your county. Debt-to-income ratio is usually capped at 43%, though some lenders go to 50%. You must live in the home as your primary residence.
Conventional zero-down loans typically require a credit score of 620 or higher, a debt-to-income ratio of 43% or lower, and two years of stable income history. Self-employed borrowers need two years of tax returns. If your credit score is below 620 or your income is irregular, a zero-down loan will be difficult to obtain; a down payment assistance program paired with a conventional loan may be a better fit.
When a Zero-Down Loan Makes Sense and When It Does Not
A zero-down mortgage makes sense if you have stable employment, good credit (620 or higher), and a debt-to-income ratio under 43%. You have saved enough for closing costs and inspections but not enough for a traditional down payment. You want to buy now rather than wait years to save. In this case, the monthly cost of mortgage insurance or a funding fee is worth the ability to build equity immediately.
A zero-down loan does not make sense if your income is irregular, your credit score is below 580, or your debt-to-income ratio is already above 43%. Lenders will either deny you or charge you a much higher interest rate, making the loan expensive. If you are self-employed or have recent job changes, you may not meet income documentation requirements. In these cases, saving for a down payment or exploring down payment assistance programs is a better path.
Zero down also does not make sense if you cannot afford closing costs or inspections. Some lenders allow you to roll closing costs into the loan, but this increases your total debt and the interest you pay. If you have no cash reserves for emergencies after closing, you are taking on too much risk.
How to Start: What Lenders Will Ask For
When you contact a lender about a zero-down mortgage, have these documents ready: two years of recent pay stubs and W-2s (or tax returns if self-employed), a recent bank statement showing your savings and checking accounts, a list of all debts (credit cards, car loans, student loans, child support), and your Social Security number so they can pull your credit report.
The lender will calculate your debt-to-income ratio by adding up all your monthly debt payments and dividing by your gross monthly income. They will also order an appraisal to confirm the home's value and a title search to ensure the seller actually owns it. This process usually takes 30 to 45 days from application to closing.
If you are a veteran, request your Certificate of may be able to access from VA.gov before you start house hunting. If you are buying in a rural area, check the USDA may be able to access map to confirm your property qualifies. These steps take a few days and will speed up your application later.
Frequently Asked Questions
Can I get a zero-down mortgage if I have bad credit?
Most zero-down programs require a credit score of 580 or higher, and most lenders prefer 620 or higher. If your score is below 580, you will likely be denied or offered a much higher interest rate. Spending 6 to 12 months paying down debt and making on-time payments to raise your score is usually more cost-effective than accepting a high rate.
What is the difference between a VA funding fee and mortgage insurance?
A VA funding fee is a one-time charge (1.5% to 3.3% of the loan) paid at closing and rolled into your loan. Mortgage insurance (PMI on conventional loans) is an ongoing monthly charge (0.5% to 1.5% per year) that you pay as long as you hold the loan. VA loans have no mortgage insurance; conventional zero-down loans do.
Can I roll closing costs into my zero-down loan?
Many lenders allow you to finance closing costs, which means they are added to your loan amount and you pay interest on them over 30 years. This reduces your cash needed at closing but increases your total debt. Ask your lender whether this option is available and what the interest cost will be.
Do I have to live in the home if I get a USDA loan?
Yes, USDA loans require you to occupy the home as your primary residence. You cannot use a USDA loan to buy an investment property or a vacation home. If you move and rent the home out later, you may be in violation of the loan terms.
What happens if I cannot afford the monthly payment after closing?
Contact your lender immediately if you fall behind. Most lenders offer forbearance (pausing payments temporarily) or loan modification (changing the terms). The longer you wait, the more damage to your credit and the fewer options you have. Do not ignore the problem.