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Most mortgages require a down payment, but there are some options that don't require one. VA loans and USDA loans are government-insured mortgages that allow for 0% down payments. If you don't qualify for a zero down option, you may still be able to borrow with as little as 3% down.
Coming up with cash for a down payment can be a major hurdle for potential homebuyers.
Some conforming mortgages allow borrowers to put down as little as 3 percent, while FHA borrowers can put down as little as 3.5 percent. These lower amounts make homeownership more realistic for some, but they can still be a significant hurdle.
For those who qualify, no-down-payment mortgages offer a way for people on tight budgets to purchase a home without having to save for years.
No down payment program for first-time home buyers
It's possible to get a mortgage with no down payment, but you must qualify for at least one of the two main government-insured mortgages that offer this option: VA loans and USDA loans.
That means you must be a veteran, active military member, or spouse (for a VA loan), or be willing to buy a home in a designated rural area of the country (for a USDA loan). You also must meet certain credit score requirements for a no down payment mortgage, which vary by lender.
Remember: even if you get a mortgage with zero down, you'll probably have to pay closing costs that amount to 3% to 6% of the loan amount, and you'll usually have to pay this amount at closing.
Eligibility to get a home loan with no down payment
VA and USDA home loans don't require a down payment, but they do have strict qualification requirements. Those eligible for these loan programs include:
VA Loans (for Veterans and Military Personnel)
VA loans are guaranteed by the U.S. Department of Veterans Affairs. These mortgages are available only to active and former military personnel who meet minimum service requirements. VA mortgage borrowers don't have to make a down payment and usually qualify for lower interest rates than conventional mortgages.
If you take out a VA loan, you will be required to pay an origination fee. This is to protect the lender in case of default. If you put down 0% and are taking out a VA loan for the first time, the origination fee will be 2.15% of the loan amount. This fee can be rolled into the loan or paid at closing.
There is no government-set minimum credit score for a VA loan, but most lenders require at least 620 to qualify.
USDA Loans (for Rural Home Buyers)
USDA loans are guaranteed by the United States 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 where you want to buy a home qualifies. The site also has a tool to determine if your income qualifies for one of these mortgages.
Like VA home loans, USDA home loans don't require a down payment, but they do charge borrowers an upfront fee. The USDA loan fee is called the guarantee fee and is equal to 1% of the loan amount. You'll also pay an annual fee equal to 0.35% of the loan amount.
Credit score requirements for USDA loans vary by mortgage lender, but you'll typically need at least 640 to qualify.
Other Low Down Payment Mortgage Options
If you don't qualify for a VA or USDA no down payment mortgage, there are other strategies you can use to reduce the down payment you have to pay. You can also seek out various down payment assistance programs or help from loved ones.
Options include:
FHA Loans
FHA loans are insured by the Federal Housing Administration, and their down payments can be as low as 3.5 percent and credit requirements are less stringent, making them a good option for first-time homebuyers or those with questionable credit histories.
These mortgages come with both an upfront mortgage insurance fee of 1.75% and annual premiums equal to 0.45% to 1.05% of the loan amount.
Conforming Loan
Mortgages that meet the Federal Housing Finance Agency's loan limits and standards set by Fannie Mae and Freddie Mac are called conforming loans. With these mortgages, you can buy a home with as little as 3 percent down.
To qualify, you'll need to be a first-time homebuyer or meet the income limits for your area, a conforming loan also requires a credit score of at least 620, and you may have to pay private mortgage insurance (PMI) if you put down less than 20%.
Lender-Specific Loan Programs
Some banks and mortgage companies may offer their own loan programs aimed at first-time homebuyers or those with smaller down payments.
These vary widely, so be sure to shop around and compare several options if you want one. You can find options from banks, credit unions, mortgage companies, online lenders, and more.
Grants and assistance programs for first-time home buyers
City or state housing agencies and local nonprofits may offer assistance programs to help with down payments and closing costs.
These may come in the form of grants that you don't have to pay back, or low-interest loans that you pay back gradually over time. In some cases, you may even be able to forgive these loans as long as you live in the home for a certain period of time.
Preparing for application procedures
To ensure you qualify for a no down payment mortgage, work to keep your credit score in good standing. If your score is below 620 to 640, you can improve it by paying off debts, disputing errors on your credit report, or requesting an increase in your credit limit. Paying your bills on time can also help.
You should also reduce your debt-to-income ratio (the percentage of your income that your monthly debt payments are). This makes you less risky to lenders (you'll have less financial obligation and be more likely to pay it back) and makes it easier to qualify for a loan.
Finally, gather financial documents such as W-2s, pay stubs, bank statements, past tax returns, etc. Lenders will need these documents to determine which loans you can qualify for.
Cost of a mortgage with no down payment
USDA and VA loans don't require a down payment, but they're not free: Both loans require upfront fees (a funding fee for VA loans, a guarantee fee for USDA loans), which act as mortgage insurance and protect the lender if you default on your payments.
Not making a down payment can also result in higher interest rates, which can significantly increase both your monthly payments and your long-term interest rate. When choosing these loans, be sure to adjust your budget to account for these additional costs.
FAQ
Yes, certain government-backed mortgage programs allow qualified borrowers to obtain a mortgage with no down payment, but other costs, such as closing costs and higher interest rates, may still apply. There are also loan programs that require a very small down payment (in some cases as little as 3%).
VA loans and USDA loans are the main no down payment loan options in the U.S. The VA loan program is only available to veterans, active military personnel, and certain spouses, while the USDA loan program is for use in certain rural and suburban areas.
Credit score requirements vary by mortgage program and lender, but USDA loans typically require a score of 640 or higher, while VA loans typically require 620 (though some lenders may allow lower scores).
Not making a down payment can result in higher mortgage interest rates and higher monthly payments, and you could end up paying additional fees.
To improve your chances of getting a no down payment loan, work on improving your credit score, reducing your debt-to-income ratio, and gathering financial documentation to strengthen your loan application.
Molly Grace
Mortgage Reporter
Aly J. Yale is a writer and editor with over 10 years of experience covering personal finance topics, including mortgages and real estate. She covers mortgages and loans for Personal Finance Insider. Experience Aly began her journalism career as a reporter and later an editor for several regional sections of the Dallas Morning News. Her work has appeared in several national publications, including Bankrate, CBS, Forbes, Fortune, Money, Newsweek, US News and World Report, Wall Street Journal, and Yahoo Finance. She has also contributed to various mortgage and real estate publications, including The Balance, Builder Magazine, Housingwire, MReport, and The Mortgage Reports. Her favorite personal finance tip is to schedule regular check-ins to make sure your credit cards, savings accounts, and other financial vehicles are aligned with your budget and financial goals. She is a member of the National Association of Real Estate Editors (NAREE).Areas of ExpertiseAly's areas of personal finance expertise include:Mortgage LoansReal Estate InsuranceEducationAly graduated from Texas Christian University with a Bachelor's in Radio/TV/Film and News Editorial Journalism. Read MoreRead MoreTop Offers from Our Partners
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