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Key Takeaways
A no down payment mortgage allows you to purchase a home without making any upfront payment at closing. The two main types of loans that typically don't require a down payment are VA loans and USDA loans. Alternatives to a no down payment mortgage include low down payment loans such as conventional loans and FHA loans, down payment assistance, and gift financing.
If you qualify for a no down payment mortgage, you can borrow the full purchase price of a home without making a down payment up front. Here's what you need to know.
What is a No Down Payment Mortgage?
A no down payment mortgage is a mortgage in which 100% of the purchase price of a home is financed without any down payment at closing. No down payment mortgages are especially advantageous for first-time homebuyers or those with limited savings.
According to Bankrate's 2024 Down Payment Survey, one-fifth (20%) of prospective homebuyers don't think they'll be able to save enough to buy a home.
No down payment mortgage options
The easiest way to avoid a down payment is to qualify for either a VA loan or a USDA loan.
VA Loans
If you are a military member, veteran, or eligible surviving spouse, you may be able to get a VA loan guaranteed by the U.S. Department of Veterans Affairs (VA) with no down payment. Unlike a regular loan, a no-down payment VA loan has no mortgage insurance requirement. However, you will have to pay an upfront funding fee, which can be rolled into your mortgage. This fee can range from 1.25 percent to 3.3 percent of the loan amount. You can reduce the funding fee by making a down payment.
USDA Loans
The United States Department of Agriculture (USDA) guarantees USDA home loans to low- to moderate-income buyers who purchase homes in specially designated rural areas. These loans do not require a down payment, but they do have an upfront guarantee fee of 1 percent of the loan principal and an annual fee of 0.35 percent, which can be rolled into the cost of the mortgage.
Other zero down payment mortgage options
Even if you're not in the military or buying in a rural area covered by the USDA, you may be able to qualify for a no-down payment mortgage. For example, United Wholesale Mortgage offers low- to moderate-income borrowers a conventional mortgage combined with a no-interest, deferred-payment loan that covers a 3 percent down payment on homes up to $500,000. New York-based Sunmark Credit Union offers a no-down payment option that allows home sellers to cover the 3 percent minimum down payment requirement. If you don't qualify for a no-down payment program through your lender, a family member or friend may be able to gift you a 3 percent down payment. In that case, you don't have to come up with the money yourself for a down payment. If you're a doctor or other professional with medical or nursing school debt, you may be able to qualify for a no-down payment physician mortgage. This can be a workaround for people who expect to earn more in the future but may not be able to save for a down payment now because of debt.
Low Down Payment Mortgage Options
If you can't qualify for a true no down payment mortgage, you may still be able to buy a home using the next best thing: a low down payment mortgage.
3% regular loan
Fannie Mae and Freddie Mac, the government-sponsored corporations that back U.S. mortgages, back several conventional loan programs with 3% down payments.
Conventional 97 HomeReady Home Possible HomeOne
Both require only a 3 percent down payment, but also require private mortgage insurance (PMI), with premiums varying by program and individual borrower.
FHA Loans
Insured by the Federal Housing Administration (FHA), an FHA loan requires only a 3.5 percent down payment, even if you have a credit score as low as 580 (a higher down payment of 10 percent is required if your credit score is between 500 and 579.) Like PMI, with an FHA loan you pay FHA mortgage insurance, but unlike traditional PMI, in most cases you’ll pay FHA premiums for the life of your mortgage.
1% Down Payment Mortgage Program
Some mortgage lenders offer conventional mortgage programs with only a 1% down payment. These include Rocket Mortgage's ONE+ program and United Wholesale Mortgage's Conventional 1% Down program. In these programs, the lender pays 2% of the 3% down payment required for a HomeReady or Home Possible loan (or up to a maximum amount, which varies by lender and loan size). The borrower only has to pay the remaining 1%.
Good Neighbor
The Good Neighbor Next Door (GNND) program is targeted to borrowers who work in certain public service professions (teachers, firefighters, police officers, paramedics, etc.) and are looking to buy a home in a qualifying area. Sponsored by the U.S. Department of Housing and Urban Development (HUD), the program allows you to get up to 50 percent off a home with a down payment of just $100.
The pros and cons of no down payment mortgages
While the ability to purchase a home with no or very little down payment is appealing, it also has drawbacks.
Benefits of a no down payment mortgage
You can buy a home now, not later. It's easier to buy a home sooner because you don't need a big down payment. You can keep more cash on hand. Even if you have enough money for a big down payment, it's a good idea to keep that money liquid for emergency savings, renovations, investments, etc.
Disadvantages of no down payment mortgage
You will have little to no equity. Home equity is the part of your home that is not funded by your mortgage. If you start out with a loan with a small or no down payment, you will have little to no equity. If home prices fall, you could end up owing more on it than your home is worth, which could make it harder to sell or refinance. You may have a higher interest rate. You may pay a higher interest rate on a loan with no or small down payment. This is because mortgage lenders may see you as a higher risk if you have less money tied up in your home. Of course, the higher the interest rate, the more you will pay overall. You will need a larger mortgage. The smaller your down payment, the more money you are borrowing, and therefore the more interest you will pay over the life of the loan. You will have to pay fees. Both VA and USDA loans have fees that are added to the cost of the loan.
Should I get a mortgage with no down payment?
Whether or not you choose a no down payment mortgage will depend primarily on your financial situation and goals. Here are some scenarios in which a no down payment mortgage may be a good idea:
If you don't have much cash If you don't mind paying a higher monthly payment If you plan to stay in your home for a long time If you can no longer afford rent If you need or want more space (for example, if you have a new family)
Frequently asked questions about no down payment mortgages
What credit score do I need to buy a house with no down payment?
The Department of Veterans Affairs and the United States Department of Agriculture don't set minimum credit score requirements for VA and USDA loans, respectively, but most lenders offering these loans do, and they require you to be at least in the “fair” range (620 for VA loans and 640 for USDA loans).
If I don't qualify for a low down payment loan, what other options do I have?
If you don't qualify for a no or low down payment mortgage, down payment assistance programs may be able to help. These programs are typically offered to first-time or repeat homebuyers within certain income thresholds based on region, and can often be applied to both your down payment and closing costs.