How To Buy a Home With No Down Payment

Buying a home may seem out of reach for many aspiring homeowners. According to the Case-Shiller National Home Price Index, the average home price has increased by 47% in the last four years!

But even if buying a home feels like a pipe dream, there are programs to help homebuyers like you. Some even make it possible to buy a home with no down payment. 

If you’re eligible for one of these programs, you might be able to buy a home sooner than you think. 

Erika Taught Me

  • Saving for a down payment is expensive and can make home ownership inaccessible.
  • VA and USDA loans are two examples of zero-down mortgages.
  • Other programs, like state homebuyer assistance programs, reduce homebuying costs.

. . .

Can You Buy a Home With No Down Payment?

Most homebuyers will need to make a down payment on a home before they’re able to buy it. 

Putting up a large sum of money indicates to lenders that you’re at lower risk of defaulting on your mortgage. While this makes sense from the lender's perspective, it makes it harder to buy a home.

Traditionally, a down payment is 20% of the total cost. So, with the median home price in the U.S. above $400,000, you’d need at least $80,000 saved up for a down payment!

For a down payment like that, you would have to save $833 a month for eight years. That’s a long time!

But, there are programs to reduce the down payment, making it more affordable.

VA loan

VA loans are government-backed mortgages designed for members of the armed forces. 

To qualify, you must be active duty, a veteran, a past or present member of the National Guard or Reserve, or a spouse of a deceased veteran.

These loans are insured by the Department of Veterans Affairs and cover some of the costs of financing a mortgage. They also make it possible to eliminate a down payment altogether. 

While many mortgage lenders offer VA loans, there are some veterans-focused lenders like Veterans United, that focus solely on VA loans.

To qualify, veterans must meet a minimum active duty service requirement based on when they served. For recent veterans, this includes:

  • 24 continuous months of active duty service
  • 90 days ordered to active duty
  • 90 days if discharged for hardship or force reduction
  • 90 days or less for service-connected disability discharge

You need to financially qualify for a VA loan as well. While the VA doesn’t set hard requirements, it does make some recommendations:

  • 620 credit score or higher
  • Maximum debt-to-income ratio of 41%

You’ll also need to submit a Certificate of Eligibility (COE) to validate that you’re eligible.

Instead of charging private mortgage insurance (PMI), the VA charges a funding fee. The fee varies from 0.5% to 3.3, depending on how much you put down and whether it’s your first time using a VA loan.

For example, if you pay less than 5%, you’ll have to pay a 2.15% funding fee. For a $400,000 house, that’s around $8,600.  

One thing to note: VA loans are for primary residences only. These aren’t intended to be properties that you rent on Airbnb or anything similar.

USDA loans

USDA loans are another type of government-backed loan. 

Provided by the U.S. Department of Agriculture, USDA loans are designed to help low- to moderate-income homebuyers purchase homes in rural and suburban areas. 

That means you could get a USDA loan for a single-family home in Iowa but not for a condo in downtown Manhattan.

To qualify, you must be shopping for a home in an eligible area. The USDA has an interactive map that you can use to see if a property is eligible. 

Homes must be primary, single-family residences. You can’t use a USDA loan to purchase a working farm.

There are financial eligibility requirements as well:

  • Your debt-to-income ratio should be lower than 41%. 
  • There are income limits based on where you plan to live. 
  • While there isn’t a set credit score requirement, you should have at least a 620 to increase your chances of qualifying.

There are some small fees to offset the costs of managing the USDA loan program. The guarantee fee is 1% of the loan amount and is added to the total cost of your mortgage. 

There is an annual fee of 0.35% that is divided up and paid in monthly installments

Doctor loans

Some states offer special zero-down loans for high-income professions. 

Referred to as “doctor loans,” these are designed for professionals who enter their careers with a lot of debt, since the high debt burden can make it hard to get a traditional mortgage.

These loans come with more favorable terms, including higher limits and less rigidity for debt-to-income ratio requirements. These loans may also bypass mortgage insurance, lowering a mortgage’s overall cost.

These types of loans vary by state and lender. If you qualify, you’ll need to do a bit of research first. 

Other Low-Cost Ways to Buy a Home With No Money Down

There are a number of programs that offer low-cost financing options. 

These programs can come with lower down payments, making buying a home more affordable.

Freddie Mac BorrowSmart Access

Freddie Mac is one of two government-sponsored enterprises that manage programs to help homebuyers in underserved communities. 

The BorrowSmart Access program requires 3% down and is open to borrowers in the following metropolitan areas:

  • Atlanta-Sandy Springs-Alpharetta, Georgia
  • Chicago-Naperville-Elgin, Illinois, Indiana, Wisconsin
  • Detroit-Warren-Dearborn, Michigan
  • El Paso, Texas
  • Houston-The Woodlands-Sugar Land, Texas
  • McAllen-Edinburg-Mission, Texas
  • Memphis, Tennessee, Mississippi, Arkansas
  • Miami-Fort Lauderdale-Pompano Beach, Florida
  • Philadelphia-Camden-Wilmington, Pennsylvania, New Jersey, Delaware, Maryland
  • St. Louis, Missouri, Illinois

To qualify, the loan has to be 140% or less of the median income where you’re looking to purchase. 

At least one homebuyer must be a first-time homebuyer. You also have to enroll in a homeownership course.

FHA loans

FHA loans are backed by the Federal Housing Administration and are designed to help low- to moderate-income homebuyers. 

These loans require a down payment of at least 3.5% and have fewer requirements than similar government-backed loans.

If you make a low down payment, you will have to make additional mortgage insurance payments. However, there aren’t income or location limits.

Homebuyer assistance programs

Individual states offer specific homebuyer assistance programs. These can be grants or low-interest loans that help cover the costs of buying a home. 

Like federal programs, there may be certain geographic or income requirements.

To see if your state offers homebuyer assistance, search your state and “homebuyer assistance programs.”

Special promotions by mortgage providers

Not all homebuying assistance programs are managed by government agencies. Private lenders may offer special promotions to encourage borrowing as well.

An example is ONE+ by Rocket Mortgage. With this program, you can put down 1% to purchase a home. Rocket Mortgage will then offer a 2% grant.

You’ll need to meet the following requirements to qualify:

  • Minimum 620 credit score
  • Income no higher than 80% of the median income of where you want to buy a home
  • Single-family primary residence
  • Maximum loan amount of $350,000

Rent-to-own

Under the right terms, renting can be a viable path to homeownership. 

Platforms like Divvy allow you to set aside a portion of your rent for a future down payment. 

Rent-to-own may limit your options and come with additional costs — like maintenance and repairs — but could be an option to consider if you want to avoid an expensive down payment.

FAQs

What is a zero-down mortgage?

A zero-down mortgage is a type of loan that allows you to finance purchasing a house with no money down. These loans are typically provided with government backing and may have extra monthly costs to reduce risks.

What credit score do I need to qualify for a zero-down mortgage?

Credit score requirements vary based on the type of loan you’re applying for. The higher the better, but ideally aim to have a credit score of at least 620.

TL;DR: Buying a Home With No Down Payment

Homes are already expensive without adding in the money you need upfront for a down payment. With the current cost of housing, it could take you many years to save up the traditional 20% down.

Thankfully, some programs, like VA loans, USDA loans, FHA loans, homebuyer assistance programs, and “doctor loans” make it possible to buy a new home with a low down payment or none at all.

For more tips on managing your money, check out these episodes of the Erika Taught Me podcast:

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.