No down payment mortgages exist, but they come with real trade-offs you need to understand before committing

You can buy a home without saving a down payment. The most common route is an FHA loan, which allows as little as 3.5% down, though some lenders offer programs that go to zero. VA loans (for military members and veterans) and USDA loans (for rural properties) also require no down payment. The catch: you will pay more in monthly costs — higher interest rates, mandatory mortgage insurance, or both — because the lender is taking on more risk. Whether this makes sense depends on your situation: if you are priced out of homeownership by saving for a down payment, a no-down option might be worth the extra cost. If you have time to save, putting money down usually saves you more money over the life of the loan.

Key Takeaways

  • FHA loans allow 3.5% down and are the most widely available no-down-payment option, but require mortgage insurance that adds to your monthly payment for the life of the loan.
  • VA loans (for may be able to access veterans and active military) and USDA loans (for rural properties) genuinely require zero down, but have their own may be able to access rules and property restrictions.
  • No-down loans typically charge higher interest rates than conventional mortgages, so your total cost over 30 years will be significantly higher than if you had put money down.
  • You still need to cover closing costs (typically 2–5% of the purchase price), which lenders may roll into the loan or which you may need to negotiate the seller to pay.
  • Your debt-to-income ratio and credit score matter more when you have no down payment, because the lender has no equity cushion if you default.

FHA loans: the most accessible no-down option

An FHA loan is insured by the Federal Housing Administration, which means the government backs the loan if you stop paying. This backing allows lenders to accept borrowers with lower credit scores and smaller down payments. The minimum down payment is 3.5%, but some lenders advertise "no money down" FHA programs by rolling your down payment into the loan itself — you are still paying it, just over 30 years instead of upfront.

The real cost is mortgage insurance. FHA loans require two insurance payments: an upfront premium (1.75% of the loan amount, usually added to your mortgage) and an annual premium (0.55% to 0.80% of the loan balance per year, split into monthly payments). On a $300,000 home with 3.5% down, that upfront premium alone is $5,250. The annual insurance stays on your loan for the entire 30 years unless you put down at least 10% initially — then it drops off after 11 years. This insurance protects the lender, not you, but you pay for it every month.

FHA loans also have limits on how much you can borrow, which vary by county. In most areas, the limit is around $420,000 to $766,550 depending on where you live. If you are buying in an expensive market, an FHA loan may not cover the price you need.

VA loans: zero down for military and veterans

If you are an active-duty service member, veteran, or surviving spouse of a veteran, a VA loan requires no down payment and no mortgage insurance. The Department of Veterans Affairs guarantees the loan, so lenders accept the risk without requiring you to pay insurance premiums. This is a genuine advantage: you save thousands compared to an FHA loan.

The trade-off is a funding fee, which is a one-time charge (0.5% to 3.3% of the loan amount, depending on your military status and down payment) that goes to the VA. This fee is usually rolled into the loan. On a $300,000 home, a 2.3% funding fee is $6,900 added to your mortgage. Unlike FHA insurance, the funding fee is a one-time cost, not an ongoing monthly charge.

You will need a Certificate of may be able to access from the VA to apply. You can request one through the VA website or ask your lender to help you obtain it. VA loans also have no upper limit on the purchase price in most cases, and no property type restrictions — you can use a VA loan for a single-family home, condo, or manufactured home, as long as it meets VA standards.

USDA loans: zero down in rural areas

The USDA Rural Development loan requires no down payment and no mortgage insurance if you are buying in an may be able to access rural area. The USDA defines "rural" broadly — it includes many towns and suburbs outside major cities, not just farmland. You can check whether your property qualifies on the USDA website by entering the address.

USDA loans have income limits (typically 115% of the area median income, though this varies by county) and are designed for borrowers who cannot get conventional financing. The interest rate is often competitive with or better than FHA rates, and there is no mortgage insurance, which saves you money compared to FHA. However, USDA loans do charge a may provide fee (1% to 2% of the loan amount), usually rolled into the mortgage.

The application process is slower than FHA or conventional loans because the USDA must verify the property location and your income. Plan for 45 to 60 days from application to closing, compared to 30 to 45 days for other loan types.

How closing costs work when you have no down payment

Closing costs (title insurance, appraisal, inspections, attorney fees, and lender fees) typically run 2% to 5% of the purchase price. On a $300,000 home, that is $6,000 to $15,000. You cannot roll these into your mortgage on most loans — you have to pay them at closing.

Your options: save the money separately, negotiate the seller to pay your closing costs (common in a buyer's market), or look for a lender that offers a "no-cost" loan (which means the lender covers closing costs in exchange for a higher interest rate). A no-cost loan spreads the cost across 30 years instead of paying it upfront, but you will pay more interest overall.

Some lenders will allow you to roll closing costs into the loan if you are putting down at least 3.5%, but this is less common and usually only available on FHA loans. Ask your lender directly what they allow.

Interest rates and monthly payments: the real cost of no down payment

Lenders charge higher interest rates on no-down loans because they have no equity cushion — if you default and the home sells for less than you owe, the lender loses money. The rate difference varies by lender and market conditions, but typically ranges from 0.25% to 0.75% higher than a conventional loan with 20% down.

On a $300,000 loan, a 0.5% rate difference adds roughly $100 to $150 per month. Over 30 years, that is $36,000 to $54,000 in extra interest. Add FHA mortgage insurance ($200 to $250 per month on a $300,000 loan), and your monthly payment is $300 to $400 higher than someone who put 20% down. Over 30 years, that is $108,000 to $144,000 in extra cost.

Use a mortgage calculator to compare the total cost of a no-down loan versus saving for a down payment. If you can save 10% to 15% in two to three years, the math often favors waiting. If you are priced out of the market and waiting means renting for five more years, a no-down loan may be the better choice despite the higher cost.

Debt-to-income ratio and credit requirements

Lenders scrutinize your finances more closely when you have no down payment. Most require a debt-to-income ratio (your total monthly debt payments divided by your gross monthly income) of 43% or lower. Some allow up to 50% if you have strong credit and savings, but this is less common.

Credit score requirements also tighten. FHA loans officially allow scores as low as 500, but most lenders require 580 or higher and charge higher rates for scores below 620. VA loans typically require 620 or higher. USDA loans usually require 640 or higher. If your credit is below these ranges, you may not be able to get a no-down loan at all.

Lenders will also ask for proof of savings or assets. Even though you are not putting money down, they want to see that you have some financial cushion — typically three to six months of mortgage payments in savings. This shows you can handle the loan if your income drops temporarily.

When a no-down loan makes sense and when it does not

A no-down loan makes sense if: you are being priced out of homeownership by the down payment requirement, you have stable income and good credit, you plan to stay in the home for at least five years (so the extra interest cost is worth it), and you have closing costs covered separately. It also makes sense if you are a veteran with a VA loan, because the lack of mortgage insurance saves you significant money compared to FHA.

A no-down loan does not make sense if: you can save a 10% to 15% down payment within two to three years, you have unstable income or are between jobs, or you are buying in a market where prices are rising fast (because you will be underwater on the loan if the market corrects). It also does not make sense if you are stretching your budget to afford the monthly payment — the higher costs of a no-down loan mean less room for error.

Run the numbers with a mortgage calculator. Compare the total cost of a no-down loan today versus a conventional loan with 15% down in two years. The difference will tell you whether waiting makes financial sense for your situation.

Frequently Asked Questions

Can I get a no-down mortgage if my credit score is below 600?

FHA loans officially allow scores as low as 500, but most lenders require 580 or higher and charge higher rates for lower scores. VA and USDA loans typically require 620 or higher. If your score is below these ranges, you may need to wait and build credit before applying, or work with a credit counselor to improve your score first.

Do I have to pay mortgage insurance forever on an FHA loan?

If you put down 10% or more, mortgage insurance drops off after 11 years. If you put down less than 10% (including 3.5%), insurance stays on for the full 30-year loan term. This is one reason putting down even a small amount extra can save money over time.

What if I cannot cover closing costs even with a no-down loan?

Ask the seller to pay your closing costs as part of the purchase agreement — this is common in many markets. Alternatively, look for a lender offering a "no-cost" loan, where the lender covers closing costs in exchange for a higher interest rate. The trade-off is higher monthly payments, but you avoid the upfront cash requirement.

Can I use a no-down loan to buy an investment property or second home?

FHA loans are for primary residences only. VA loans are also for primary residences. USDA loans are for primary residences in rural areas. If you are buying an investment property or second home, you will need a conventional loan with a down payment, typically 15% to 25%.

What happens if the home appraises for less than the purchase price?

The lender will only loan up to the appraised value. If you agreed to pay $300,000 but it appraises at $280,000, you either need to renegotiate the price, cover the $20,000 difference in cash, or walk away. With no down payment, you have no cushion to absorb this gap, so appraisal issues are more serious.