A 0 down payment mortgage lets you borrow the full purchase price of a home without saving a down payment first
You can buy a house with no money down through several real programs: VA loans (for military members and veterans), USDA loans (for rural properties), and some conventional loans backed by lenders willing to take on the extra risk. The catch is that borrowing 100% of the purchase price costs you more in interest and requires mortgage insurance, which adds to your monthly payment. The lender is also more selective about who they approve — your credit score, debt-to-income ratio, and employment history matter more when you have no equity cushion.
The appeal is real: you can stop renting and start building home equity without waiting years to save. But the monthly cost is higher than it would be with a down payment, and you start underwater if the market dips. Understanding which programs exist, what they cost, and whether the math works for your situation is the first step.
Key Takeaways
- VA loans and USDA loans are the most common 0 down options; conventional 0 down loans exist but are rare and carry higher rates.
- You will pay mortgage insurance (PMI on conventional loans, funding fees on VA loans, may provide fees on USDA loans) that increases your monthly payment by $100 to $300 or more.
- Your interest rate will be higher than it would be with a down payment, because the lender has less protection if you default.
- Lenders approve 0 down mortgages only for borrowers with good credit (usually 620 or higher), stable income, and a debt-to-income ratio below 43 to 50 percent.
- You can refinance later to remove mortgage insurance once you have built enough equity, but that requires a separate application and closing costs.
VA loans: the most common 0 down option for veterans
If you served in the military, a VA loan is usually your cheapest path to 0 down financing. The Department of Veterans Affairs guarantees a portion of the loan to the lender, which means the lender takes less risk and charges you a lower interest rate than a conventional 0 down loan. You pay no down payment, no PMI, and no appraisal fee. The only upfront cost is the VA funding fee, which ranges from 1.4% to 3.6% of the loan amount depending on whether it is your first VA loan and how much you put down (if anything).
You can roll the funding fee into the loan itself, so you do not have to pay it out of pocket. Your monthly payment includes the funding fee spread across 30 years, which is cheaper than paying it upfront but does mean you pay interest on it. A $300,000 VA loan with a 2.3% funding fee costs $6,900 in fees, which becomes roughly $23 per month if financed over 30 years.
VA loans have no income limits, no maximum loan amount (though individual lenders set their own caps), and no prepayment penalty. You can refinance into a conventional loan later if rates drop, or stay in the VA loan for life. The main requirement is a Certificate of may be able to access from the VA, which you can request online through VA.gov.
USDA loans: 0 down for homes in rural areas
A USDA loan is designed for borrowers buying in rural or suburban areas designated by the USDA. The property must be in an may be able to access area (you can check on the USDA website), and you cannot use the loan to buy in cities or their immediate suburbs. Like VA loans, USDA loans require no down payment and no PMI. Instead, you pay an upfront may provide fee (1% of the loan amount) and an annual fee (0.35% of the loan balance per year), both of which can be rolled into the loan.
USDA loans are open to any U.S. citizen or permanent resident, not just veterans. There is an income limit — you cannot earn more than 115% of the area median income for your county — but most rural areas have high enough limits that middle-class borrowers may have access to. Your debt-to-income ratio must be 41% or lower, which is stricter than VA loans.
The approval process is slower than VA or conventional loans because the USDA reviews the property to confirm it meets their standards. This can add 1 to 2 weeks to closing. Like VA loans, USDA loans have no prepayment penalty and can be refinanced later.
Conventional 0 down loans: rare, expensive, and hard to get
Some conventional lenders offer 0 down mortgages to borrowers with excellent credit and strong income, but these loans are uncommon and cost significantly more than VA or USDA loans. You will pay a higher interest rate (often 0.5% to 1% above a 20% down loan) and mortgage insurance (PMI) that typically runs 1% to 2% of the loan amount per year. On a $300,000 loan, that is $3,000 to $6,000 per year, or $250 to $500 per month.
Conventional 0 down loans usually require a credit score of 700 or higher, a debt-to-income ratio below 43%, and proof of stable employment. Some lenders require a larger cash reserve (3 to 6 months of mortgage payments) to offset the risk. Because these loans are rare, you may need to shop multiple lenders to find one that offers them.
The advantage is flexibility: you can use a conventional 0 down loan for any property type and any location, unlike USDA loans. You can also remove PMI once you reach 20% equity, which usually takes 5 to 10 years depending on home appreciation and how much extra you pay toward principal.
What 0 down mortgages actually cost each month
The monthly payment on a 0 down mortgage includes principal, interest, property taxes, homeowners insurance, and mortgage insurance. The insurance piece is what makes the payment higher than it would be with a down payment. Here is how the costs compare:
| Loan Type | Interest Rate (typical) | Mortgage Insurance | Monthly Payment on $300,000 (30-year) |
|---|---|---|---|
| VA loan | 6.5% to 7.0% | None (funding fee financed) | $2,100 to $2,200 |
| USDA loan | 6.5% to 7.0% | 0.35% annual (financed) | $2,150 to $2,250 |
| Conventional 0 down | 7.0% to 7.5% | 1% to 2% annual (PMI) | $2,300 to $2,500 |
| Conventional with 20% down | 6.5% to 7.0% | None | $1,800 to $1,900 |
These numbers assume current market rates and do not include property taxes or homeowners insurance, which vary by location. The point is that 0 down costs $300 to $700 more per month than putting 20% down, even before taxes and insurance. Over 30 years, that difference adds up to $108,000 to $252,000 in extra payments.
However, if you cannot save a down payment, the choice is not between 0 down and 20% down — it is between 0 down and renting. If renting costs $1,800 per month and a 0 down mortgage costs $2,200 per month, you are paying $400 more but building equity instead of paying a landlord. That trade-off is worth evaluating for your specific situation.
Credit score and debt-to-income requirements
Lenders approve 0 down mortgages only for borrowers who look low-risk on paper. Your credit score must typically be 620 or higher for USDA loans, 640 or higher for VA loans (though the VA itself has no minimum), and 700 or higher for conventional 0 down loans. A lower score does not disqualify you, but it will raise your interest rate by 0.5% to 1.5%, which adds $100 to $300 per month to your payment.
Your debt-to-income ratio (DTI) is the total of all your monthly debt payments divided by your gross monthly income. Lenders want to see DTI below 43% for most 0 down loans, though VA loans sometimes go up to 50% if you have strong compensating factors like a large savings account or military pension. If your DTI is too high, you can lower it by paying down credit cards or car loans before you apply, or by increasing your income (though lenders usually only count income you have received for at least 2 years).
Lenders also verify employment and may ask for recent pay stubs, tax returns, and W-2s. If you are self-employed, you will need 2 years of tax returns and possibly a CPA letter. If you changed jobs recently, the lender will want to confirm the new job is in the same field and that there is no gap in employment.
How to remove mortgage insurance after you buy
Once you have built equity in the home, you can refinance into a loan with a lower rate and no mortgage insurance. For VA loans, you can refinance into a VA Streamline Refi (also called an IRRRL), which requires minimal paperwork and no new appraisal. For USDA loans, you can refinance into a conventional loan or another USDA loan once you have 20% equity. For conventional 0 down loans, PMI drops off automatically once you reach 20% equity, or you can request it be removed earlier if you have paid down the principal significantly.
Refinancing costs money — typically $2,000 to $5,000 in closing costs — so it only makes sense if the interest rate drop saves you more than the refinancing cost over the time you plan to stay in the home. A VA Streamline Refi is cheaper (often $500 to $1,500) because it skips the appraisal and some paperwork, making it a common move for VA borrowers when rates drop.
The timeline depends on home appreciation and how much extra you pay toward principal. If your home appreciates 3% per year and you make regular payments, you will reach 20% equity in 7 to 10 years. If you make extra principal payments or the market appreciates faster, it can happen in 5 years or less.
Frequently Asked Questions
Can I get a 0 down mortgage if I have bad credit?
Most lenders require a credit score of at least 620 for USDA loans and 640 for VA loans. If your score is lower, you may not be approved, or you will pay a higher interest rate. Spending 3 to 6 months paying bills on time and paying down credit card balances can raise your score enough to may have access to.
What happens if the home value drops after I buy?
You will owe more than the home is worth, which is called being underwater. This does not affect your monthly payment, but it does mean you cannot sell without taking a loss, and refinancing becomes harder. This is why 0 down loans are riskier — you have no equity cushion if the market dips.
Can I use a 0 down mortgage to buy an investment property or second home?
VA and USDA loans are for primary residences only. Conventional 0 down loans may be available for investment properties or second homes, but rates will be higher and requirements stricter. Most lenders require at least 15% to 25% down for investment properties.
How long does it take to get approved for a 0 down mortgage?
VA and conventional loans typically close in 30 to 45 days. USDA loans take longer — 45 to 60 days — because the USDA must review the property. The timeline depends on how quickly you provide documents and how busy the lender is.
Can I pay off a 0 down mortgage early without a penalty?
Yes. VA loans, USDA loans, and most conventional loans have no prepayment penalty. You can pay extra toward principal each month or make a lump-sum payment whenever you want, and it will reduce the total interest you pay and shorten the loan term.