Saving for a down payment is often the biggest roadblock for first-time home buyers. The good news is, you don’t need to put down 20% to buy a home.
In fact, you may be able to buy a house with no money down if you served in the military, are a rural home buyer, are a member of a credit union or qualify for 100% financing through certain mortgage lenders. Down payment assistance programs can also make it possible to buy a house with very little money out of pocket.
Find out more about no-down-payment mortgages and whether they’re right for your situation.
No-down-payment mortgage options
There are two government-backed loans that allow you to buy a home with no down payment.
If you or your spouse are a qualifying current service member or veteran, you may be eligible for a VA loan guaranteed by the Department of Veterans Affairs.
What to expect: VA loans require no minimum down payment or private mortgage insurance, but you do have to pay a funding fee, which covers the cost of foreclosure in case you default on the loan.
While the VA doesn’t set a minimum credit score or income requirement, lenders do. The property also has to be your primary residence and meet the VA’s minimum safety standards.
» MORE: Best VA mortgage lenders
USDA loans are zero-down mortgages backed by the U.S. Department of Agriculture for low- and moderate-income home buyers in eligible rural areas.
What to expect: While USDA loans don’t technically require mortgage insurance, you are required to pay a guarantee fee, which protects the lender in the event of foreclosure.
The USDA doesn’t have a minimum credit score requirement, but lenders often require a score of at least 640.
» MORE: Best USDA mortgage lenders
If you are a medical professional, you may qualify for a physician loan with no down payment.
What to expect: Physician loans don't require private mortgage insurance, and typically have flexible proof of employment requirements and accommodate higher debt-to-income ratios because of the large amount of medical school debt the borrower may have.
Other 100% mortgages
Government loans aren’t the only game in town when it comes to no-down-payment home loans.
Some, but not all, lenders offer their own 100% mortgage financing. These loans aren’t common because of the risk involved for lenders; they can lose a lot of money if you default on the mortgage and end up in foreclosure.
What to expect: Depending on the mortgage lender, they may require that the loan is for your primary home, that you live in a certain area or that you have an excellent credit score. If your mortgage lender is a credit union, you’ll need to be a member.
Nerdy tip: A no-down-payment mortgage doesn’t mean you won’t pay anything out of pocket. Even with a zero-down-payment requirement, you should plan to pay closing costs like origination and title-related fees and mortgage insurance. An earnest money deposit may also be needed to show the seller you are serious about the purchase.
Pros and cons of no-down-payment home loans
While you may feel like you won the lottery with a no-down-payment loan, there are advantages and disadvantages:
You don't have to save up as much money.
You can become a homeowner sooner.
You'll have more cash in your pocket for upgrades or expenses.
You'll have little or no equity in your home for the first few years of homeownership.
You may have to pay mortgage insurance premiums and higher monthly mortgage payments, interest rates or fees.
You may still have to bring some money to the table to pay closing costs or make an earnest money deposit.
Low-down-payment mortgage options
If you don’t qualify for a no-down-payment mortgage, the next best thing could be a loan that requires a small down payment. The minimum requirements vary depending on the type of mortgage and the lender you choose.
FHA loans, which are backed by the Federal Housing Administration, require a down payment of as little as 3.5% for borrowers with a credit score of 580 or greater. But if your score falls between 500 and 579, you will have to put down 10%.
What to expect: In order to qualify for an FHA loan, there are debt-to-income ratio requirements, and the property must meet FHA’s minimum standards. You’ll also have to pay for FHA mortgage insurance.
» MORE: Best lenders for FHA loans
HomeReady and Home Possible loans
Some conventional mortgages, such as HomeReady and Home Possible loans, require as little as 3% down and are designed for low-income home buyers.
What to expect: Fannie Mae’s HomeReady mortgage allows a credit score as low as 620. With Freddie Mac’s Home Possible loans, you need a score of at least 660.
While you have to pay private mortgage insurance, both of these low-down-payment conventional loans allow you to cancel it when your equity reaches 20%. If all borrowers on the loan are first-time home buyers, at least one person has to take a homeownership education course to qualify.
Good Neighbor Next Door
If you are a teacher, police officer, emergency medical technician or firefighter, the Good Neighbor Next Door program may help you buy a home with as little as $100 down.
What to expect: Even if you’re in a qualifying profession, Good Neighbor Next Door mortgages can only be used to buy foreclosed homes in designated revitalization areas. The supply of houses is limited, and you must commit to use the home as your primary residence for at least three years.
Down payment assistance programs
If you don’t initially qualify for a no- or low- down-payment mortgage, don’t despair. There are many state and local first-time home buyer programs that offer down payment and closing cost assistance.