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

You can buy a home without saving a down payment through several real programs: VA loans (for military service members), USDA loans (for rural properties), FHA loans (which require 3.5 percent down, not zero, but are the closest most civilians get), and some conventional loans from banks that will finance 100 percent of the purchase price. Each one has different rules about who qualifies, what the property must be, how much you pay in interest and insurance, and what happens if you stop paying.

The catch is that lenders do not give away money. If you are not putting cash down, you are paying for that risk in other ways: higher monthly payments, mandatory mortgage insurance that protects the lender if you default, stricter income requirements, or limits on the price range you can afford. Understanding which program fits your situation—and what it will actually cost you over 15 or 30 years—matters more than the headline of "no money down."

Key Takeaways

  • VA loans and USDA loans genuinely require zero down payment; FHA loans require 3.5 percent down, which is the lowest option for most homebuyers.
  • No-down-payment loans charge higher interest rates or require mortgage insurance premiums added to your monthly payment, so the total cost is higher than a loan where you put money down.
  • VA loans are only for military service members, retirees, and surviving spouses; USDA loans are only for properties in designated rural areas and borrowers below certain income limits.
  • Lenders will require proof of stable income, a credit score in a specific range, and debt-to-income ratio below a certain threshold—these requirements are often stricter for no-down loans than for conventional mortgages.
  • The monthly payment on a no-down loan includes principal, interest, property taxes, homeowners insurance, and often mortgage insurance, which can add $200 to $400 per month depending on the loan size.

VA loans: zero down for military service members and veterans

A VA loan is a mortgage may provide by the U.S. Department of Veterans Affairs. It requires zero down payment, zero mortgage insurance, and typically a lower interest rate than conventional loans. You may have access to if you served on active duty (usually 90 days or more), are a current service member, or are a surviving spouse of someone who died in service or from a service-connected disability.

To use a VA loan, you first obtain a Certificate of may be able to access from the VA, which you provide to the lender. The lender then finances up to the full purchase price. You pay a one-time funding fee (usually 2 to 3 percent of the loan amount) that can be rolled into the mortgage, so you do not pay it upfront. Your monthly payment covers principal, interest, property taxes, and homeowners insurance—no mortgage insurance required.

The trade-off is that VA loans have a maximum loan amount that varies by county, and some lenders have stricter credit score requirements than others. You also cannot use a VA loan for investment properties or vacation homes, only for your primary residence. If you have used a VA loan before and still owe money on it, you may not may have access to for a second one unless you have paid off the first.

USDA loans: zero down for rural property buyers

A USDA loan is a mortgage backed by the U.S. Department of Agriculture and is designed for rural homebuyers. It requires zero down payment and zero mortgage insurance. You may have access to if the property is in a USDA-designated rural area (which includes many towns and suburbs, not just farms) and your household income is at or below 115 percent of the area median income.

The application process is similar to a conventional mortgage: you provide income verification, tax returns, and bank statements. The USDA guarantees the loan, so the lender takes less risk and can offer better terms. You pay a one-time may provide fee (usually 1 to 2 percent of the loan amount) that is rolled into the mortgage. Your monthly payment covers principal, interest, property taxes, homeowners insurance, and utilities (the USDA includes utilities in the debt calculation).

The main limitation is the property location. You can check whether a specific address qualifies using the USDA's online may be able to access map. You also cannot use a USDA loan if your income exceeds the limit for your county, and the lender will verify this before approval. If you have used a USDA loan in the past three years, you typically cannot use another one.

FHA loans: 3.5 percent down, the lowest option for most buyers

An FHA loan is a mortgage insured by the Federal Housing Administration. It requires only 3.5 percent down payment, which is the lowest down payment option available to most homebuyers who do not may have access to for VA or USDA loans. You can use an FHA loan for any property type and any location, and there is no income limit.

The catch is that FHA loans require mortgage insurance. You pay an upfront mortgage insurance premium (usually 1.75 percent of the loan amount) that is rolled into the mortgage, and then a monthly mortgage insurance premium (usually 0.5 to 1 percent of the loan amount per year) added to your payment. This insurance protects the lender if you default; it does not protect you. If you put down 10 percent or more, the monthly insurance drops off after 11 years. If you put down less than 10 percent, you pay it for the life of the loan.

FHA loans have lower credit score requirements than conventional loans (some lenders will approve borrowers with scores in the 580 range, versus 620 or higher for conventional), which makes them accessible to people rebuilding credit. However, the lender will still verify your income and check your debt-to-income ratio. You also cannot use an FHA loan if you have had a foreclosure or bankruptcy within the past two years (or longer, depending on the lender).

Conventional loans with zero down: rare and expensive

Some banks and mortgage companies offer conventional loans that finance 100 percent of the purchase price, meaning zero down payment. These loans are not government-backed, so the lender carries all the risk. To offset that risk, the lender charges a higher interest rate (often 0.5 to 1 percent higher than a conventional loan with 20 percent down) and requires mortgage insurance.

The mortgage insurance on a 100-percent-financed conventional loan is typically higher than on an FHA loan, and it does not automatically drop off after a certain number of years. You have to request removal once you have paid the loan down to 80 percent of the original purchase price, which takes years. The lender will also require a higher credit score (usually 700 or above) and stricter income verification than for an FHA loan.

In practice, a zero-down conventional loan is more expensive than an FHA loan with 3.5 percent down. Unless you have a specific reason to avoid FHA (such as a recent bankruptcy that disqualifies you), an FHA loan is usually the better choice for a conventional borrower with no down payment saved.

What no-down-payment loans actually cost each month

The monthly payment on a no-down loan includes several components. For a $300,000 home with a 7 percent interest rate over 30 years, the principal and interest alone is about $1,995. Add property taxes (which vary by location but average $200 to $400 per month), homeowners insurance ($100 to $200 per month), and mortgage insurance ($150 to $300 per month on an FHA loan), and your total payment is $2,500 to $2,900.

If you had put 20 percent down ($60,000), your loan amount would be $240,000, the principal and interest would be $1,596, and you would have no mortgage insurance. Your total payment would be roughly $2,000 to $2,300. The difference is $500 to $600 per month, or $6,000 to $7,200 per year. Over 30 years, that adds up to $180,000 to $216,000 in extra cost.

This is why lenders ask about your debt-to-income ratio. If your gross monthly income is $5,000, a $2,900 payment uses 58 percent of your income just for the mortgage—before you pay utilities, food, car payments, or credit cards. Most lenders will not approve a loan if your total debt payments (including the new mortgage) exceed 43 to 50 percent of your gross income. Some will go higher for VA or USDA loans, but there is a limit.

Income and credit requirements vary by program and lender

VA loans typically require a credit score of 580 or higher, though some lenders prefer 620. USDA loans usually require 640 or higher. FHA loans can go as low as 580. Conventional loans with zero down typically require 700 or higher. These are minimums; your actual approval depends on the rest of your financial picture.

Lenders will ask for your last two years of tax returns, recent pay stubs, bank statements showing your savings, and a full list of debts (credit cards, car loans, student loans, child support). They will calculate your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. For a no-down loan, most lenders want this ratio at 43 percent or lower, though some will go to 50 percent for VA loans.

If you have been self-employed for less than two years, have recently changed jobs, or have irregular income, the lender will scrutinize your application more closely. Some lenders will average your income over two years; others will use only the most recent year. This is why it pays to shop around—different lenders have different rules, and one rejection does not mean you cannot get approved elsewhere.

How to start the process for a no-down loan

First, determine which programs you might may have access to for. If you are a veteran or active service member, contact a VA-approved lender or the VA itself to request your Certificate of may be able to access. If you are interested in a USDA loan, check the USDA's property may be able to access map and verify your income against the limit for your county. If neither applies, start with FHA.

Next, get pre-approved. This means a lender reviews your financial documents and tells you how much they will lend you. Pre-approval is not a may provide, but it shows sellers you are serious and gives you a realistic budget. The lender will order a credit report, verify your income, and ask about your assets and debts. This process usually takes three to five business days.

Once you are pre-approved, you can start house hunting. When you find a property, your real estate agent or the lender will order an appraisal to confirm the home is worth what you are paying. For USDA loans, the property must also pass a USDA inspection. For FHA loans, the property must meet FHA standards (no major structural damage, functioning utilities, no lead paint hazards). If the appraisal comes in low or the inspection fails, you may need to renegotiate the price or walk away.

Frequently Asked Questions

Can I use a no-down loan to buy a condo or townhouse?

Yes, but with restrictions. VA and USDA loans can finance condos and townhouses if they meet specific requirements (the building must be on an approved list, and there cannot be too many units owned by investors). FHA loans are more flexible. Conventional loans have the fewest restrictions. Ask your lender whether the specific property qualifies before you make an offer.

What happens if I lose my job after I get the loan?

You are responsible for the payment regardless. If you cannot pay, the lender can foreclose. This is why lenders verify income and want to see stable employment history. If you lose your job, contact your lender immediately—some have hardship programs that can temporarily lower your payment or pause it while you find work. Do not ignore the problem.

Can I refinance out of mortgage insurance later?

Yes, but only if you build equity. On an FHA loan with less than 10 percent down, you pay mortgage insurance for the life of the loan unless you refinance into a conventional loan. To refinance, you typically need 20 percent equity (meaning the home is worth 25 percent more than you owe) and a credit score of 620 or higher. Refinancing costs money in closing costs, so calculate whether the savings are worth it.

Do I need to be a first-time homebuyer to use these programs?

No. VA loans, USDA loans, and FHA loans are available to anyone who meets the may be able to access requirements, regardless of whether you have owned a home before. Conventional zero-down loans are also available to repeat buyers. However, if you have a recent foreclosure or bankruptcy, some programs will not approve you for a set period of time.

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: pay the $20,000 difference out of pocket, renegotiate the price with the seller, or walk away. This is why having some savings, even if you are not putting it down as a down payment, is important.