How to buy a house with no money down

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• Most mortgages require you to make a down payment, but there are a couple of options that don’t.
• If you don’t qualify for a zero down option, you may still be able to put as little as 3% down.
• Many lenders and agencies offer assistance to help borrowers get into a home with little to no cash.

Coming up with the cash for a down payment can be a big hurdle for anyone hoping to become a homeowner.

Some conforming mortgages allow borrowers to put down just 3%, while FHA borrowers can make a minimum down payment of 3.5%. These lower amounts can make homeownership more feasible for some, but this can still be a significant hurdle.

For those who are eligible, no money down home loans offer a way for those on tighter budgets to get into a home without having to spend years saving up. Here’s how to buy a house with no money down.

Do you have to have a down payment to buy a house?

You don’t always need a down payment to buy a house, but it depends on the type of mortgage you get.

Types of zero down mortgages

To buy a house with no down payment, you’ll need to be eligible for at least one of the two major types of government-backed mortgages that offer this option: VA loans and USDA loans.

VA loans

To get a VA loan, you’ll need to be a military veteran or active duty military member. Some surviving spouses may be eligible as well.

USDA loans

To qualify for a USDA loan, the home you’re purchasing will need to be located in an eligible area, which includes rural and some suburban parts of the country. You’ll also need to meet your area’s USDA loan income limits.

No money down doesn’t mean no money at all

Keep in mind: Even if you get a zero-down mortgage, you’ll still likely need to pay closing costs, which can equal between 2% and 5% of the loan amount. You’ll typically owe this amount at closing.

What credit score is needed to buy a house with no money down?

Though VA and USDA mortgages require no down payment, they do have stringent requirements for who can qualify. Here’s who’s eligible for these loan programs:

VA loans (for veterans and military service members)

VA loans don’t have any government-set credit score minimums, but many lenders require at least a 620 score to qualify — though some will allow scores down to 580.

VA loans are guaranteed by the U.S. Department of Veterans Affairs. These mortgages are available to current and former service members who meet minimum service requirements. VA mortgage borrowers enjoy the ability to put no money down and interest rates that are typically lower than conventional mortgage rates. 

If you take out a VA loan, you will have to pay a funding fee, which protects the lender in case of default. If you’re putting 0% down and it’s your first time getting a VA loan, your funding fee will be equal to 2.15% of the loan amount. This fee can be financed into your loan, or you can pay it at closing.  

USDA loans (for rural homebuyers)

Credit score requirements for USDA loans vary by mortgage lender. Typically, you’ll need at least a 640 to qualify.

USDA loans are guaranteed by the U.S. Department of Agriculture. These loans are only available to borrowers in eligible rural or suburban areas who meet certain income limits. You can use the USDA’s eligibility map to see if the area you’re buying your house in is eligible. The site also has a tool for determining if your income qualifies you for one of these mortgages.

Like VA mortgages, USDA mortgages allow no down payment but charge borrowers an upfront fee. The USDA loan fee is known as a guarantee fee and is equal to 1% of the loan amount. You’ll pay a yearly fee equal to 0.35% of the loan amount as well.

Other low down payment mortgage options

If you don’t qualify for VA or USDA no down payment home loans, there are other strategies you can use to reduce the down payment you’re required to pay. You can also see if you’re eligible for down payment assistance.

Options include:

FHA loans

FHA loans are backed by the Federal Housing Administration. They allow down payments as low as 3.5% and have less stringent credit requirements, making them a good option for first-time homebuyers or those with rocky credit histories. 

These mortgages come with both an upfront mortgage insurance premium of 1.75%, as well as an annual premium that equals between 0.15% and 0.75% of your loan amount. 

Conforming loans

Mortgages that conform to Federal Housing Finance Agency loan limits and the standards set by Fannie Mae and Freddie Mac are known as conforming loans. With one of these mortgages, it’s possible to buy a home with just 3% down.

To qualify, you may need to be a first-time homebuyer or meet income limits for your area. Conforming loans also require a credit score of at least 620. If you make a down payment of less than 20%, you’ll need to pay for private mortgage insurance (PMI).

Lender-specific loan programs

Many banks and mortgage lenders offer proprietary loan programs aimed at first-time homebuyers or those with little money for a down payment. This includes 1% down mortgages.

These will vary widely, so be sure to shop around and compare several options if this is something you’re looking for. You can look to banks, credit unions, mortgage companies, and online lenders for options.

First-time homebuyer no down payment programs

Cities, state housing agencies, and local nonprofits often offer assistance programs that can help you cover your down payment or closing costs. HFA loans, for example, are offered by state housing finance agencies and typically come with down payment and closing cost assistance.

Assistance can come in the form of grants, which don’t need to be repaid, or low-interest loans, which you’ll gradually pay back over time. In some cases, these loans may be forgivable as long as you live in the home for a certain length of time.

Preparing for the application process

To ensure you qualify for a no down payment mortgage, work on getting your credit score in a good place. If it’s below the 620 to 640 mark, you can pay down your debts, dispute errors on your credit report, or ask for a credit line increase to improve your score. Make sure you’re paying your bills on time, too.

You should also reduce your debt-to-income ratio — or the share of your income your total monthly debt payments take up. This makes you less risky to lenders (you have fewer financial obligations and will be more likely to make your payments) and could make it easier to qualify.

Finally, gather up your financial documents, including your W-2s, pay stubs, bank statements, and past tax returns. Your lender will need these to determine what you can qualify for.

The costs of no down payment mortgages

Though you won’t need a down payment with USDA and VA loans, they don’t come for free. Both loans require upfront fees (funding fees for VA loans and guarantee fees for USDA loans). These act as mortgage insurance and protect your lender if you don’t make your payments. 

You might also get a higher interest rate when forgoing a down payment. This could increase both your monthly payment and your long-term interest costs significantly. Make sure you’ve adjusted your budget for these added costs when choosing one of these loans.

How to buy a house with no money down FAQs

Molly Grace

Mortgage Reporter

Aly J. Yale