Key Takeaways
- Two loan types offer true zero-down mortgages: VA loans (for military members and veterans) and USDA loans (for rural and suburban homebuyers).
- Over 2,000 down payment assistance programs nationwide can cover your down payment through grants, forgivable loans, or low-interest second mortgages.
- If you don’t qualify for zero-down options, FHA loans require just 3.5% down, and conventional loans can go as low as 3% for first-time buyers.
- Even with no down payment, you’ll still need cash for closing costs (typically 2-6% of the purchase price), though many programs can help with these too.
- No-down-payment loans mean higher monthly payments, more total interest, and starting with zero home equity—but they get you into a home sooner.
- USDA income limits for 2026 are $119,850 for households of 1-4 people in most areas, with higher limits in expensive markets.
Saving for a down payment is one of the biggest hurdles to homeownership. With the median U.S. home price hovering above $400,000, even a modest 5% down payment means coming up with more than $20,000 in cash—on top of closing costs, moving expenses, and reserves.
Here’s the good news: you don’t necessarily need a traditional down payment to buy a home. Special loan programs, government assistance, and creative financing strategies can help you purchase a house with little to no money down. Let’s explore all your options.
Can You Really Buy a House With No Money Down?
Yes, but with important caveats. Only two types of mortgages allow true zero-down financing: VA loans and USDA loans. Both are government-backed programs with specific eligibility requirements—you can’t simply choose a no-down-payment mortgage because you’d prefer not to save.
If you don’t qualify for VA or USDA financing, you still have options. Down payment assistance programs, gift funds from family, and low-down-payment loan programs can dramatically reduce the cash you need to close. Some buyers combine multiple strategies to get into a home with minimal out-of-pocket expense.
It’s also important to understand that “no down payment” doesn’t mean “no money needed.” You’ll still face closing costs, which typically run 2-6% of the purchase price. However, many assistance programs can help with closing costs too, and you can sometimes negotiate for the seller to cover them. You can run through the numbers more using our Mortgage Calculator.
VA Loans: Zero Down for Military Members
VA loans are the gold standard for no-down-payment mortgages. Backed by the Department of Veterans Affairs, these loans allow eligible borrowers to purchase a home with 100% financing—no down payment required.
Who Qualifies for a VA Loan
VA loan eligibility extends to active-duty service members, veterans, National Guard and Reserve members, and certain surviving spouses of deceased veterans. Specific service requirements include serving 90 consecutive days during wartime, 181 consecutive days during peacetime, 6 years in the National Guard or Reserves, or being the spouse of a service member who died in the line of duty or from a service-connected disability.
To apply, you’ll need a Certificate of Eligibility (COE) from the VA, which confirms your service history and entitlement amount.
VA Loan Benefits
Beyond the zero-down-payment feature, VA loans offer several advantages. There’s no private mortgage insurance (PMI), which can save you $100-$300 per month compared to conventional loans with low down payments. VA loans typically offer lower interest rates than conventional mortgages—often 0.25% to 0.5% lower. There’s also no prepayment penalty, flexible credit requirements, and the ability to finance up to 100% of the home’s value with no loan limits for borrowers with full entitlement.
VA Funding Fee
VA loans don’t require mortgage insurance, but they do charge a one-time funding fee. For first-time users with no down payment, the fee is 2.15% of the loan amount. On a $300,000 loan, that’s $6,450. The fee increases to 3.3% for subsequent uses.
The good news: you can roll this fee into your loan balance, so you don’t need cash to pay it at closing. And the fee is waived entirely for veterans receiving VA disability compensation and surviving spouses of service members who died in service.
If you choose to make a down payment voluntarily, the funding fee drops: 1.5% with 5% down, or just 1.25% with 10% or more down.
USDA Loans: Zero Down for Rural Buyers
USDA loans are backed by the U.S. Department of Agriculture and offer 100% financing for homes in eligible rural and suburban areas. Despite the name suggesting farmland, many suburban communities qualify—the USDA estimates that 97% of U.S. land area is eligible.
USDA Eligibility Requirements
To qualify for a USDA loan, you must meet both property and income requirements.
Property eligibility: The home must be in a USDA-designated rural area. You can check any address using the USDA eligibility map. Many suburban areas and small towns qualify, so don’t assume you’re ineligible without checking.
Income limits: USDA loans are designed for low-to-moderate income buyers. For 2026, the income limits in most areas are $119,850 for households with 1-4 members and $158,250 for households with 5-8 members. Higher limits apply in expensive areas. The USDA counts income from all adult household members, not just the loan applicants.
Other requirements: The home must be your primary residence (no investment properties or vacation homes), you must be a U.S. citizen or qualified non-citizen, and you must have a credit score of at least 640 (though some lenders may accept lower scores).
USDA Loan Costs
USDA loans have no down payment requirement and no traditional mortgage insurance, but they do charge guarantee fees. There’s an upfront guarantee fee of 1% of the loan amount and an annual fee of 0.35% of the remaining balance (paid monthly). These fees are lower than FHA mortgage insurance, making USDA loans quite affordable for eligible buyers.
Down Payment Assistance Programs
If you don’t qualify for VA or USDA loans, down payment assistance (DPA) programs can bridge the gap. According to Down Payment Resource, over 2,000 programs are available nationwide, offered by state and local housing agencies, nonprofits, employers, and some private lenders.
Types of Down Payment Assistance
Grants: Free money that never needs to be repaid. Grant amounts typically range from $5,000 to $25,000, or 3-5% of the purchase price.
Forgivable loans: Second mortgages with no monthly payments that are forgiven after you live in the home for a set period (often 5-10 years). If you sell, refinance, or move before the forgiveness period ends, you may need to repay some or all of the assistance.
Deferred-payment loans: Interest-free or low-interest second mortgages with no monthly payments. Repayment is deferred until you sell, refinance, or pay off your primary mortgage.
Low-interest loans: Traditional second mortgages with below-market interest rates, requiring monthly payments alongside your primary mortgage.
National Down Payment Assistance Programs
National Homebuyers Fund (NHF): Offers up to 5% of the mortgage amount as either a grant or a three-year forgivable loan. Works with FHA, VA, USDA, and conventional loans nationwide.
Chenoa Fund: Provides 3.5% or 5% of the purchase price through either forgivable loans (forgiven after 36 on-time payments) or repayable second mortgages. Requires a minimum 600 credit score and income at or below 115% of area median income.
Bank of America’s Community Homeownership Commitment: Offers up to $7,500 toward closing costs plus up to $10,000 (or 3% of sales price) for down payment in select markets.
State and Local Programs
Nearly every state has its own housing finance agency offering down payment assistance. Programs vary widely in terms of assistance amounts, eligibility requirements, and whether funds must be repaid. Search for “[your state] housing finance agency” or check HUD’s state resources to find programs in your area.
Many cities and counties offer additional local assistance, especially for first-time buyers, essential workers (teachers, firefighters, healthcare workers), or buyers purchasing in specific neighborhoods targeted for revitalization.
Low Down Payment Alternatives
If zero-down options aren’t available to you, several loan programs require minimal down payments.
FHA Loans: 3.5% Down
FHA loans require just 3.5% down with a credit score of 580 or higher (10% down with scores of 500-579). On a $300,000 home, that’s $10,500—still substantial, but more achievable than 20%. FHA loans are popular with first-time buyers because of their flexible credit requirements and the fact that your entire down payment can come from gift funds.
Conventional Loans: 3% Down
First-time buyers can access conventional loans with just 3% down through programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible. These programs have income limits (typically 80% of area median income) but offer competitive rates and lower mortgage insurance costs than FHA loans for borrowers with good credit. Learn more about FHA Loans vs Conventional Loans here.
State Bond Programs
Many state housing agencies offer first mortgages with below-market interest rates and built-in down payment assistance. These “bond programs” are funded through tax-exempt bonds and often combine a low-rate mortgage with grants or forgivable second mortgages covering the down payment.
Using Gift Funds for Your Down Payment
Can’t save for a down payment but have generous family members? Gift funds are allowed on most loan types, though rules vary.
FHA loans: 100% of your down payment can come from gift funds from family members, close friends, employers, charitable organizations, or government agencies.
Conventional loans: Gift funds are allowed, but if your down payment is less than 20%, at least 5% must typically come from your own funds (though exceptions exist for certain programs).
VA and USDA loans: Since no down payment is required, gift funds are typically used toward closing costs if needed.
For any gift, you’ll need a gift letter stating that the funds are a gift (not a loan) and don’t need to be repaid. Lenders will also verify that the gift came from an acceptable source and may require documentation of the transfer.
Negotiating Seller Concessions
Seller concessions are contributions from the home seller toward your closing costs or prepaid items. While they can’t technically cover your down payment (which must come from you or an allowed source), they reduce the total cash you need to close.
Maximum seller concessions vary by loan type: FHA allows up to 6% of the purchase price, VA allows up to 4% plus all closing costs, USDA has no official limit, and conventional loans allow 3-9% depending on your down payment amount.
Seller concessions are more negotiable in buyer’s markets or with motivated sellers. In competitive markets, asking for concessions may weaken your offer. Your real estate agent can advise on what’s realistic in your area.
Pros and Cons of No-Money-Down Mortgages
Advantages
Get into a home sooner: Rather than spending years saving for a down payment while rents and home prices rise, you can start building equity now.
Keep cash for other needs: Your savings remain available for emergencies, moving costs, furniture, or home repairs.
Preserve investments: If you have money invested, you might earn more by keeping it invested than you’d save by making a larger down payment.
Access homeownership: For many buyers, especially in expensive markets, zero-down options are the only realistic path to homeownership.
Disadvantages
Higher monthly payments: Financing 100% of the home’s price means a larger loan and bigger payments compared to putting money down.
More total interest: You’ll pay interest on a larger loan balance over the life of the mortgage, increasing your total cost.
No starting equity: With no down payment, you start with zero equity. If home values drop, you could owe more than your home is worth (being “underwater”).
Mortgage insurance or fees: While VA loans skip mortgage insurance, they charge funding fees. USDA loans have guarantee fees. If you use a low-down-payment conventional or FHA loan, you’ll pay mortgage insurance.
Potentially higher rates: Some zero-down or low-down-payment loans carry slightly higher interest rates, though VA loans are often an exception.
What About Closing Costs?
Even with no down payment, you’ll need money for closing costs—typically 2-6% of the purchase price. On a $300,000 home, that’s $6,000 to $18,000. Closing costs cover loan origination fees, appraisal, title insurance, escrow deposits, recording fees, and other transaction expenses.
Ways to Cover Closing Costs
Down payment assistance programs: Many DPA programs can be used for both down payment and closing costs.
Seller concessions: Negotiate for the seller to cover some or all closing costs.
Lender credits: Some lenders offer credits toward closing costs in exchange for a slightly higher interest rate.
Roll into your loan: VA loans allow you to finance the funding fee. USDA loans allow financing of the upfront guarantee fee. Some closing costs can be rolled into the loan amount on certain loan types.
Gift funds: Family members can gift money for closing costs just as they can for down payments.
No-closing-cost loans: Some lenders offer mortgages with no upfront closing costs, though you’ll pay a higher interest rate in exchange.
Frequently Asked Questions
VA loans have no official minimum credit score, though most lenders want 620 or higher. USDA loans typically require 640+. If you’re using down payment assistance with an FHA loan, you’ll need at least 580 for the 3.5% down payment option. Each lender sets its own requirements, so shop around if your credit is borderline.
VA loans can be used on most primary residences without property restrictions. USDA loans are limited to homes in eligible rural and suburban areas—check the USDA eligibility map. Both require the home to be your primary residence; neither can be used for investment properties or vacation homes.
Many programs require first-time buyer status (defined as not having owned a home in the past three years), but not all. According to Down Payment Resource, about 39% of assistance programs are available to repeat buyers. VA and USDA loans have no first-time buyer requirement.
Start with your state housing finance agency’s website. You can also use tools like Down Payment Resource (downpaymentresource.com) or search HUD’s list of state and local programs. A knowledgeable local lender can also help identify programs you might qualify for.
Most assistance programs work with FHA, VA, USDA, and conventional loans, but specific program rules vary. Some DPA programs require you to use a specific loan product or lender. Always verify compatibility before applying.
Generally, yes—lenders view borrowers with no down payment as higher risk. You may face stricter requirements for credit score, debt-to-income ratio, or cash reserves. However, VA and USDA loans are designed for zero-down lending and have reasonable qualification standards for eligible borrowers.
If you exceed USDA income limits, consider other options: FHA loans (3.5% down with no income limits), conventional loans (3% down for first-time buyers), or down payment assistance programs with higher income thresholds. Some state and local programs have more generous income limits than federal programs.
Sometimes yes. You might layer a state DPA program with a local grant, for example. However, there are limits on how much total assistance you can receive, and some programs can’t be combined with others. Your lender can help you understand what’s stackable in your situation.
VA and USDA loans typically take 30-45 days to close, similar to other mortgage types. Adding down payment assistance may extend the timeline by a few days due to additional paperwork and coordination. Plan for at least 45-60 days when using assistance programs.
With no equity cushion, a market downturn could leave you “underwater”—owing more than your home is worth. This makes it difficult to sell or refinance. While home values have historically trended upward over time, short-term declines happen. Consider this risk, especially if you might need to move within a few years.
If you qualify for VA financing and have cash available, it’s often financially smarter to invest that money rather than putting it into your home. VA loans have no PMI and low rates regardless of down payment. However, a down payment does reduce your funding fee, lower your monthly payment, and provide immediate equity. There’s no one-size-fits-all answer—run the numbers for your situation.
Yes, self-employment doesn’t disqualify you from VA or USDA loans, though you’ll need to document your income thoroughly (typically with two years of tax returns). The bigger challenge for self-employed borrowers is often proving stable, sufficient income rather than the loan type itself.
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