How to Buy a House with No Money Down

The Loans That Allow Zero Down

Two loan programs let you buy a home with no down payment: VA purchase loans and USDA home loans. A VA purchase loan often requires no down payment as long as the sales price is not higher than the home's appraised value. A USDA home loan typically requires no down payment for eligible rural and low-to-moderate-income borrowers.

Outside those two programs, plan to bring at least some cash. The next-lowest options are 3% down on many conventional programs and 3.5% down on a Federal Housing Administration (FHA) loan, which needs a credit score of at least 580 under Department of Housing and Urban Development (HUD) rules. State and local housing agencies also run down payment assistance programs, each with its own eligibility rules.

Zero down covers the down payment and nothing more. Closing costs are separate from the down payment, so a VA or USDA buyer needs a plan to pay them too.

VA Loans for Veterans, Service Members, and Survivors

A VA loan starts with a Certificate of Eligibility (COE). Lenders can often get a COE in one day, so ask your lender to request it before you start making offers.

The zero down feature depends on the appraisal. VA purchase loans often require no down payment as long as the sales price is not higher than the home's appraised value. If a home's price comes in above its appraisal, that condition is not met, so ask your lender how much cash the gap would take before you sign a contract.

VA loans carry a one-time funding fee, figured as a percentage of the loan amount instead of the purchase price. The fee ranges from 0.5% to 3.3% depending on the loan type, the loan amount, the down payment, and whether you are a first-time user of the benefit. You can pay it at closing or finance it into the loan.

On a $300,000 loan, that range works out to $1,500 at 0.5% and $9,900 at 3.3%. A down payment of at least 5% can lower the fee. Veterans with a service-connected disability rating and certain surviving spouses are exempt from it entirely.

VA loans carry no private mortgage insurance (PMI) or mortgage insurance premiums. Run your numbers in our VA loan calculator to see how financing the funding fee changes your payment. If you also qualify for other loans, our VA loan vs. conventional loan comparison and FHA loan vs. VA loan breakdown set the options side by side.

USDA Loans for Eligible Rural Areas

A USDA loan is built for eligible rural and low-to-moderate-income borrowers, and it typically requires no down payment.

Three tests apply to every USDA borrower: - Your income must be at or below the limit for the area. - The property must sit in an eligible area. - You must use the home as your primary residence.

USDA borrowers pay an upfront guarantee fee and ongoing mortgage insurance premiums to USDA. Current USDA guarantee fee and premium rates are not given on this page, so ask lenders or USDA for them before you compare a USDA quote with other loans. Program details are on the USDA single family housing page. If the address or your income misses one of the three tests, our USDA loan vs. FHA loan comparison sets the two options side by side.

Cash Needed to Buy a House with No Money Down

A no down payment mortgage removes the down payment and leaves every other cost in place. Closing costs are separate from the down payment.

Ask each lender for an itemized list of closing costs and any reserve requirement in dollars, then add them up before you call a loan zero down.

The VA funding fee can be financed instead of paid in cash. Financing it lowers the cash you bring to closing, but it raises your loan amount and your payment. See our first-time home buyer guide for more.

Low-Down Options Outside VA and USDA

An FHA loan requires a minimum down payment of 3.5% with a credit score of at least 580, under a HUD rule. Lenders may set stricter requirements on top of that floor, so a 580 score does not guarantee approval at every lender.

Many conventional programs allow as little as 3% down. On a $300,000 home, 3% is $9,000 and 3.5% is $10,500, a $1,500 difference in the cash you need up front.

State and local housing agencies run down payment assistance programs with their own eligibility rules. Ask your state housing finance agency for its program list and the requirements for each one. Then plug the amount you would still owe into our down payment calculator to see your real starting cash.

Fees and Mortgage Insurance Compared

Each zero-down program charges you in its own way, so compare them in dollars. A VA loan has a one-time funding fee of 0.5% to 3.3% of the loan amount and no PMI or mortgage insurance premiums.

A USDA loan has an upfront guarantee fee plus ongoing mortgage insurance premiums paid to USDA. Because those premiums continue after closing, ask the lender to show the USDA premium as a monthly dollar amount next to the principal and interest.

For FHA and conventional quotes, ask each lender to list any mortgage insurance as a monthly dollar figure and any upfront charge as a closing-day figure. Line up every quote by two numbers: cash due at closing and total monthly payment. If one quote has lower cash due but a higher monthly payment, decide which matters more to you.

Bad Credit and a No Down Payment Mortgage

There is no single universal minimum credit score for buying a house with no money down, because lenders set their own requirements.

FHA's rule is a 580 credit score with 3.5% down, and lenders may set stricter overlays above it. VA and USDA lenders set their own minimums. That FHA rule still requires a down payment.

If your credit is weak, ask every VA or USDA lender you contact for its minimum score in writing. Get quotes from at least two lenders before you decide your score rules out a zero down loan.

A Decision Rule by Situation

Match your situation to one starting point: - If you are an eligible veteran, service member, or survivor, start with a VA loan and have your lender request your COE first. - If you are not VA-eligible, the home is in an eligible rural area, and your income is at or below the area limit, start with a USDA loan. - If neither fits, compare FHA at 3.5% down (with a 580 score or higher) against 3% conventional programs, and ask your state housing finance agency about assistance.

Zero down is a poor fit if your top goal is the lowest possible monthly payment. No down payment means a bigger loan and a larger payment, so in that case put down what you can and test the result in our affordability calculator.

Our answer changes in two cases. If you can put 5% down on a VA loan, the lower funding fee may be worth the cash. If you are not VA-eligible and a home you like turns out to sit in a USDA eligible area, a USDA loan moves to the top of the list.

Mistakes to Avoid When You Buy a House with No Money Down

Avoid these mistakes:

• Treating zero down as free. A zero down loan is a bigger loan, and a bigger loan means a larger monthly payment.
• Financing every fee without doing the math. Financing a 3.3% VA funding fee on a $300,000 loan adds $9,900 to the balance, so you would owe $309,900 from day one.
• Offering more than a home is likely to appraise for on a VA loan. VA zero down terms often hold only when the sales price is not higher than the appraised value.
• Forgetting closing costs, which are separate from the down payment. Start with the down payment calculator to compare zero, 3%, and 3.5% down on the same home, then take those numbers to a lender when you are ready to buy a house with no money down.

Frequently asked questions