How To Buy a House With No Money Down | 2024

By: Maggie Overholt Updated By: Ryan Tronier Reviewed By: Paul Centopani
May 21, 2024 - 19 min read

Buying a house with no money down is possible

Discovering how to buy a house with no money down may seem like a pipe dream, but it’s a reality for many first-time homebuyers.

With specialized first-time home buyer loans with zero down payment and creative financing strategies, you can turn your homeownership dreams into a reality without the burden of a substantial upfront investment.

Click to see your ZERO down eligibility


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Can you buy a house with no money down?

Yes, you can buy a house with no money down, especially as a first-time home buyer.

There are specialized first-time home buyer loans with zero down and various assistance programs designed to make homeownership more accessible and affordable.

While most conventional and FHA loans require a minimum 3% to 3.5% down payment, there are unique options available for specific groups, such as veterans and rural home buyers with moderate to low incomes, that allow for zero down payments. These first-time home buyer programs create a pathway to owning a home without the need for a substantial upfront payment.

Discover your zero-down mortgage options. Start here

Moreover, every state offers forms of home buyer assistance. These programs, often in the form of government grants, can potentially cover your entire down payment, alleviating the burden of significant out-of-pocket expenses. This makes the dream of homeownership more achievable, even if you aren’t eligible for a zero-down loan.

What is a zero-down mortgage?

A zero-down mortgage is a home loan that allows you to purchase a property without making a down payment, enabling you to finance 100% of the home’s purchase price. These loans are backed by government agencies, such as the Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA), which provides guarantees to lenders, minimizing their risk.

The main benefit of zero-down mortgages is that they remove the significant upfront cost of a down payment, making homeownership more accessible for first-time home buyers and those with limited savings. However, eligibility requirements vary depending on the specific loan program, and factors such as credit score, debt-to-income ratio, and income limits may apply. Additionally, while advantageous in the short term, zero-down mortgages may result in higher monthly payments and increased overall interest costs over the life of the loan.

How to buy a house with no money down

Buying your dream home without an upfront down payment may seem impossible, but it’s a reality for many first-time home buyers. With the help of government-backed mortgages, first-time home buyer loans with zero down, and creative financing strategies, you can successfully purchase a house with no money down.

Check your zero-down home loan eligibility. Start here

 

Follow these steps to make your homeownership dreams a reality without the burden of a large upfront investment.

Infographic showing five ways to buy a house with no money down, including government loans, grants, and closing cost assistance programs

Step 1: Apply for a zero-down VA loan or USDA loan

The easiest way to buy a house with no money down is to use a government-backed mortgage.

VA loans are designed for veterans and active military members, and they offer the advantage of no down payment and no requirement for mortgage insurance. To be eligible for a VA loan, you must meet specific service requirements, such as serving 90 consecutive days during wartime or 181 days during peacetime.

Similar to this, USDA loans are intended for borrowers in rural and some suburban areas and also offer the benefit of no down payment. To qualify for a USDA loan, your property must be located in an eligible rural area, and your income must not exceed 115% of the area median income.

Step 2: Use a first-time home buyer program to cover the down payment

For those who find saving for a down payment challenging, various first-time home programs are available at both the state and federal levels. These programs offer grants or low-interest loans to cover down payments and closing costs.

Some programs even offer second mortgages that can be used in conjunction with a primary mortgage to help cover the down payment and closing costs. For example, the HomePath Ready Buyer program offers up to 3% in closing cost assistance for eligible buyers purchasing a Fannie Mae-owned property.

By reducing the initial financial barrier, these homeownership programs make buying a home more attainable for individuals and families with limited funds.

Step 3: Ask for a down payment gift from a family member

Receiving a down payment gift from a family member can significantly ease the financial burden of buying a home. For your lender to accept this down payment source, a gift letter is required from the donor stating that the money is a gift and not a loan.

This letter should include details such as the relationship between the donor and recipient, the amount of the gift, and the address of the property being purchased.

Step 4: Get the lender to pay your closing costs (lender credits)

One way to reduce upfront expenses is to negotiate for lender credits, where the lender agrees to cover your closing costs in exchange for a slightly higher interest rate on your mortgage.

While this strategy can help minimize your initial out-of-pocket expenses, it’s essential to consider the long-term impact of a higher interest rate on your monthly mortgage payments and the total cost of your loan over time.

Step 5: Get the seller to pay your closing costs (seller concessions)

Another strategy to manage upfront costs is through seller concessions, where the seller agrees to pay a portion or all of the buyer’s closing costs. Seller concessions are typically negotiated as part of the home purchase agreement and can cover various fees, such as property taxes, attorney fees, and mortgage points. However, keep in mind that the maximum amount of seller concessions allowed varies depending on the type of mortgage you choose.

Seller concessions can significantly lower the immediate financial burden for the buyer, making the process of purchasing a home more accessible.

First-time home buyer loans with zero down payment

For many first-time home buyers, saving up for a down payment can be a significant obstacle to homeownership. However, there are loan programs available that allow eligible buyers to purchase a house with no money down. These zero-down-payment loans can help first-time buyers enter the housing market sooner and with less upfront costs.

Check your eligibility for first-time home buyer loans with zero down. Start here

The USDA loan and the VA loan are two popular options that allow eligible buyers to buy a house with no money down. Both are available to first-time home buyers and repeat buyers alike, but they have special requirements to qualify.

USDA loans

The USDA loan, offered by the U.S. Department of Agriculture, provides 100% financing for eligible home buyers. While often associated with rural areas, the USDA’s definition of “rural” is quite broad, including many suburban neighborhoods.

The primary aim of the USDA is to assist low-to-moderate-income home buyers, with about 97% of the U.S. land area falling under the USDA’s eligibility criteria.

Key requirements of a USDA loan include:

  • Zero down payment.
  • A minimum credit score of 640.
  • Debt-to-income ratio below 41%.
  • Stable two-year employment history.
  • Income not exceeding 115% of the area’s median income.
  • Purchasing a single-family primary residence in an eligible area.
Check your USDA loan eligibility. Start here

Besides requiring no down payment, another significant advantage of the USDA loan is that it often has lower mortgage rates compared to similar low- or no-down-payment options. However, it’s important to note that USDA loans do require an upfront funding fee, which can be financed into the loan, as well as an annual fee that is paid as part of your monthly mortgage payment.

VA loans

The VA loan is a zero-down mortgage available to members of the U.S. military, veterans, and surviving spouses. The U.S. Department of Veterans Affairs guarantees VA loans and helps lenders offer favorable rates and more lenient qualification criteria.

Check your VA loan eligibility. Start here

Most veterans, active-duty service members, and honorably discharged service personnel are eligible for the VA program. Home buyers who have spent at least six years in the Reserves or National Guard are also eligible, as are spouses of service members killed in the line of duty.

VA loan requirements: 

  • Certificate of Eligibility from the VA
  • 0% down payment
  • Credit score of 580-620
  • Debt-to-income ratio below 41%
  • Two-year employment history
  • Buy a 1- to 4-unit primary residence

VA home loans have no maximum loan amount and charge no ongoing mortgage insurance, potentially lowering monthly payments. Additionally, VA mortgage rates tend to be the lowest of any home loan program.

Doctor loans for physicians

Doctor loans are specialized home buyer programs designed to meet the unique needs of medical professionals. Recognizing the financial burdens of medical school debt and the eventual high earning potential of doctors, these loans offer more flexible terms and requirements.

Doctor loan requirements:

  • Must be a medical resident, practicing physician, or fellow
  • Credit score is usually 700 or higher, but it is more lenient than conventional loans
  • High educational debt is okay if you enroll in a repayment plan
  • Employment contracts are often required, especially for new or resident doctors
  • A small down payment is generally around 5%, though some offer zero down
  • Loans are mainly for primary residences, but some programs allow second homes or investments.
Check your physician loan eligibility. Start here

Nurses and other healthcare professionals may not qualify for special no-down-payment mortgage loans but can take advantage of programs offering low down payments, grant money, and deferred loans to cover down payment and closing costs.

First-time home buyer loans with a low down payment

While there are options for first-time home buyer loans with zero down, not everyone will qualify for one.

However, there are several loan programs available that offer low-down-payment mortgage options, making homeownership more accessible for many Americans. These programs can help you secure financing for your primary residence while minimizing the initial out-of-pocket expenses.

Check your first-time home buying options. Start here

Conventional 97 loan program

The Conventional 97 loan program allows first-time home buyers to purchase a home with just a 3% down payment. This type of loan is backed by Fannie Mae and Freddie Mac, and it offers competitive interest rates. To qualify for this program, you’ll typically need a minimum credit score of 620 and a debt-to-income ratio of 50% or less. Keep in mind that with a down payment of less than 20%, you’ll be required to pay private mortgage insurance (PMI) until you build sufficient home equity.

HomeReady loan program

The HomeReady loan program, offered by Fannie Mae, is designed to help low-income and first-time home buyers. This program allows for a down payment as low as 3% and offers flexible credit requirements. To qualify, your income must be at or below 80% of the area median income (AMI). One of the benefits of this program is that it allows you to use gifts, grants, or other sources of funds for the down payment and closing costs.

Home Possible loan program

Similar to the HomeReady program, Freddie Mac’s Home Possible loan program offers a 3% down payment option for low-income and first-time home buyers. This program has a minimum credit score requirement of 660 and allows for flexible sources of funds for the down payment and closing costs. Additionally, the Home Possible program offers reduced mortgage insurance premiums, making your monthly mortgage payment more affordable.

FHA loan program

The Federal Housing Administration (FHA) loan program is a popular choice among first-time home buyers due to its low down payment requirement of 3.5%. FHA loans are backed by the government and have more lenient credit requirements compared to conventional loans. To qualify for an FHA loan, you’ll need a minimum credit score of 580 and a debt-to-income ratio of 50% or less. Keep in mind that FHA loans require both upfront and annual mortgage insurance premiums, which can increase your overall loan amount and monthly payments.

Good Neighbor Next Door program

The Good Neighbor Next Door program is a unique opportunity for eligible public servants, such as teachers, firefighters, law enforcement officers, and emergency medical technicians. This program offers a substantial 50% discount on the purchase price of a home in a revitalization area. To qualify, you must commit to living in the property as your primary residence for at least 36 months. While this program is not specifically designed for first-time home buyers, it can be an excellent opportunity for those who qualify.

Piggyback loans

Piggyback loans, also known as 80/10/10 loans, involve taking out two separate loans to cover the purchase price of a home. The first loan covers 80% of the purchase price, while the second loan covers 10%, leaving you with a 10% down payment. This strategy can help you avoid paying private mortgage insurance (PMI) while still offering a low down payment option. However, keep in mind that the second loan often comes with a higher interest rate, and you’ll need to qualify for both loans separately.

Chart showing minimum home loan down payments including zero down for VA and USDA loans, 3% down for conventional, and 3.5% down for FHA

How to find the best no-down-payment mortgage lenders

Finding the best lenders for first-time home buyer loans with zero down payment comes down to two important tasks:

  1. Exploring state and local first-time home buyer programs
  2. Gathering quotes from lenders who specialize in government-backed loans, like VA loans and USDA loans
Compare quotes from multiple lenders at once. Start here

 

When you’re a first-time home buyer eager to secure a zero-down loan, choosing the right lender becomes paramount. The lender you select will determine not only the mortgage rates you’ll pay but also the overall experience you’ll have during the home-buying process.

What to look for in a lender

While large national lenders often advertise competitive rates, smaller local credit unions and community banks should not be dismissed. These institutions frequently offer personalized service and might have more flexible criteria when it comes to credit score requirements and income limits.

  • Transparency: A good lender will clearly outline the terms, rates, and fees associated with your loan. This helps you understand the full scope of your financial commitment.
  • Credibility: Check for lender certifications and read reviews. A lender’s reputation is a good indicator of the quality of service you can expect.
  • Flexibility: Lenders vary in their flexibility regarding credit score requirements, income limits, and loan customization. Find one that aligns with your specific situation.
  • Customer service: Excellent customer service can go a long way, especially for a first-time home buyer who may have numerous questions and concerns.

How to compare lenders

When it comes to the nitty-gritty of comparing loan quotes, consider more than just the interest rate. Consider the loan’s term length, which will have a significant impact on both your monthly payments and the total repayment amount.

Additionally, pay attention to the underwriting process, as this can vary significantly between lenders and impact the overall time and complexity of securing your loan.

  • Mortgage interest rates: The lower the mortgage rate, the less you’ll pay over the loan term. However, remember that zero-down loans may inherently have higher rates due to the lender’s perceived risk.
  • Loan terms: 15-year, 20-year, or 30-year? The term of the loan impacts both your monthly payment and the overall cost of the loan.
  • Fees and charges: Look beyond the interest rate to other costs such as origination fees, application fees, and any penalties.
  • Monthly payments: Make sure you understand what your monthly commitments will be, as this will significantly affect your budget.

Types of lenders known for zero-down home loans for first-time buyers

Lastly, consider specialized lenders who cater to specific needs. For example, if you’re an American veteran, some lenders specialize in VA loans and can walk you through the specific advantages and stipulations of these no-down-payment loans.

Similarly, lenders well-versed in USDA loans can be invaluable if you’re considering buying a rural property.

  • VA loan experts: Lenders like Veterans United and Navy Federal are known for specializing in VA loans, offering favorable terms to active-duty service members, veterans, and select family members.
  • USDA loan providers: If you’re looking at rural properties, consider lenders like PNC Bank and Fairway Independent Mortgage, who are experienced in USDA loans.
  • Online lenders: Platforms like Rocket Mortgage and Lending Tree offer the convenience of online applications and often have lower overhead, which could translate into better terms for you.
  • Credit unions and community banks: These institutions often have a vested interest in building local communities and may offer favorable terms to first-time home buyers.

By doing thorough research and comparing multiple loan quotes, you’ll be well-equipped to select a lender with the best first-time home buyer loans with zero down for your particular needs.

How to get money for a down payment and closing costs

Buying a home is a significant milestone, but coming up with a down payment and closing costs can be a major hurdle for many borrowers. Closing costs alone can range from 3% to 5% of the loan amount, which means you could pay $15,000 to $25,000 on a $500,000 loan.

Check your zero-down home loan options. Start here.

Even if you qualify for a no-down-payment mortgage, you still need to get your closing costs covered if you want to buy a house with no money. Fortunately, there are several strategies that can help you make the minimum down payment and cover closing costs:

Apply for down payment assistance programs

First-time homeowners with low-to-moderate income may be eligible for down payment assistance (DPA) programs offered by state and local governments. These programs can provide grants or loans up to 5% or more of the home’s sale price, potentially covering the entire down payment for a low down payment FHA or conventional mortgage.

Although upfront closing costs may still apply, DPA programs can significantly reduce out-of-pocket expenses. To learn about available programs and eligibility requirements, contact your local housing finance authority or a mortgage lender.

Ask for a down payment gift from family

Many homebuyers receive help from family in the form of a cash gift. To ensure the gift is not considered an additional loan, lenders typically require a gift letter confirming the relationship, the amount, and that no repayment is expected. This letter helps document the source of your down payment funds. Additionally, be aware of tax rules regarding such gifts.

Apply for a closing cost assistance program

Most down payment assistance programs can be used for closing cost assistance, too. However, the grant or loan you receive likely won’t be enough to fully cover both the down payment and loan fees. Consequently, you may have to pay the remainder out of pocket.

Get the seller to pay closing costs

It’s possible for a motivated seller to pay your closing costs. The way this often works is that you pay a little more for the home, and the seller kicks back that “extra” cash to cover your fees. You’re essentially rolling the cost into your mortgage loan when you go this route. You can learn more about how seller concessions work here.

Get the lender to pay closing costs

Some mortgage lenders offer incentives to home buyers; they might be willing to cover part or all of your closing costs. This can be helpful if you’re short on cash, but be aware that no-closing-cost mortgages usually come with higher interest rates. So you could pay significantly more over the life of the loan. You can learn more about how lender-paid closing costs work here.

Buy with a partner or co-borrower

Purchasing a home with a partner or friend can halve the down payment burden, but careful planning and clear agreements are essential. Discuss how mortgage loan payments, maintenance, and other expenses will be shared, and consider involving a lawyer to draft a co-ownership agreement that protects both parties.

This agreement should address ownership, payments, and contingencies in case of disputes or changes in circumstances. Learn more about buying a house with a co-borrower.

Use your own savings or investments

Funding a down payment through savings is straightforward. Start by setting a budget and timeline, cutting back on non-essentials, and automating transfers to a savings account.

If you need to access funds quickly, liquidating investments in stocks, bonds, or mutual funds can be an option. However, be mindful of tax implications and market conditions when cashing out investments. To minimize adverse impacts on your long-term goals, consult a financial advisor.

Borrow from your 401(k)

Some 401(k) plans allow borrowing against retirement savings for a down payment. Typically, you can borrow up to 50% of the vested balance (maximum $50,000), with loans repaid within five years through at least quarterly payments. While interest paid goes back into the account, it’s in after-tax dollars, and you’ll miss out on potential investment growth during repayment.

Before borrowing, understand the terms and impact on your retirement funds, and be aware of potential consequences if you lose your job. Read our guide on the pros and cons of borrowing from a 401(k) to buy a house.

Pros and cons of first-time home buyer loans with zero down

For first-time home buyers, home loans with zero down payment offer a faster path to homeownership without the need to save for years. However, these loans come with both advantages and drawbacks.

Pros:

  • Become a homeowner faster by avoiding the wait to save for a down payment
  • Financial flexibility to allocate funds for other immediate needs
  • Potential nonprofit grants for first-time homebuyers
  • Larger loan amounts may offer more significant mortgage interest deductions

Cons:

  • Higher monthly payments due to the lack of a down payment
  • Higher interest rates compared to loans with a down payment
  • Income and household limits may restrict eligibility, particularly for HUD-affiliated programs
  • Some loans require completion of a homebuyer education course
  • Limited initial equity, making you more vulnerable to real estate market fluctuations

Before deciding on a zero-down-payment loan, consult with a lender or real estate agent to understand how factors like debt-to-income ratio (DTI) and eligibility requirements impact your specific situation. While these loans can expedite homeownership, carefully weigh the long-term financial implications.

FAQ: How to buy a house with no money down

Compare first-time home buyer loans with no money down. Start here

Can I buy a house with no money down and no closing costs?

You can buy a house with no money down and no closing costs by using a zero-down loan and convincing a highly motivated seller to pay your closing costs. In some cases, you may be able to opt for the lender to cover the closing costs, but be aware that this usually means higher interest rates. Another option is to qualify for down payment assistance, which can help with some closing costs, but you’ll likely still need to pay a portion out of pocket, as these funds rarely cover both the down payment and all loan fees completely.

Can I refinance a zero-down mortgage?

Yes, it is possible to refinance a zero-down mortgage, such as a USDA or VA loan. However, qualifying for a refinance may require you to wait until you have built up sufficient equity in your home. Additionally, some low-down-payment mortgages, such as the Conventional 97 loan, may offer more favorable terms for refinancing compared to other loan programs. Be sure to discuss your refinancing options with your lender to determine the best course of action for your specific situation.

How much are closing costs? 

On average, closing costs are about 3% to 5% of the mortgage loan amount. That means closing costs on a $500,000 mortgage loan could range from $15,000 to $25,000. The amount you’ll pay in closing fees depends on your home purchase price, down payment amount, mortgage lender, and location.

Does the buyer always pay closing costs? 

Every home buyer is responsible for covering closing costs. However, there are various ways to reduce your out-of-pocket expenses. Buyers can ask the seller to cover their closing costs or have the lender pay them in exchange for a higher mortgage rate. You can also use funds from a down payment assistance program toward your upfront loan fees.

What credit score do I need to buy a house with no money down? 

You’ll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.

What are down payment assistance programs?

Down payment assistance programs are available to home buyers nationwide, and many first-time home buyers are eligible. DPA can come in the form of a home buyer grant or a loan that covers your down payment and/or closing costs. Offerings vary by state, so be sure to ask your mortgage lender which programs you may be eligible for.

See if you qualify for a first-time home buyer loan with no down payment

Today’s home buyers have access to a wide range of mortgage programs. With all the low- and no-down-payment loans available, many first-time buyers can learn how to buy a house with no money down.

If you’re ready to buy a house but don’t have a lot of cash saved up, ask your mortgage lender about options. Odds are, there’s a home loan that could work for your financial situation.

Time to make a move? Let us find the right mortgage for you


Maggie Overholt
Authored By: Maggie Overholt
The Mortgage Reports contributor
Maggie Overholt is a former Editor at The Mortgage Reports, where she helps make complex topics more approachable. She has also written for publications specializing in insurance and personal finance.
Ryan Tronier
Updated By: Ryan Tronier
The Mortgage Reports Editor
Ryan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.