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How To Get A Mortgage With No Down Payment
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Coming up with the cash for a down payment can be a big hurdle for anyone hoping to become a homeowner.
Some conforming mortgages allow borrowers to put down just 3%, while FHA borrowers can make a minimum down payment of 3.5%. These lower amounts can make homeownership more feasible for some, but this can still be a significant hurdle.
For those who are eligible, no money down mortgage loans offer a way for those on tighter budgets to get into a home without having to spend years saving up.
First-time homebuyer no down payment programsIt's possible to get a mortgage with no down payment. But you have to be eligible for at least one of the two major types of government-backed mortgages that offer this option: VA loans and USDA loans.
This means you'll either need to be a military veteran, active duty military member, or the spouse of one (for VA loans), or be willing to buy a home in a designated rural part of the country (for USDA loans). You will also need to meet certain credit score requirements for zero down mortgages. These vary by lender.
Keep in mind: Even if you get a zero-down mortgage, you'll still likely need to pay closing costs, which can equal between 3% and 6% of the loan amount. You'll typically owe this amount at closing.
Qualifying for a mortgage without a down paymentThough VA and USDA mortgages require no down payment, they do have stringent requirements for who can qualify. Here's who's eligible for these loan programs:
VA loans (for veterans and military service members)VA loans are guaranteed by the US Department of Veterans Affairs. These mortgages are available only to current and former service members who meet minimum service requirements. VA mortgage borrowers enjoy the ability to put no money down and interest rates that are typically lower than conventional mortgage rates.
If you take out a VA loan, you will have to pay a funding fee, which protects the lender in case of default. If you're putting 0% down and it's your first time getting a VA loan, your funding fee will be equal to 2.15% of the loan amount. This fee can be financed into your loan, or you can pay it at closing.
VA loans don't have any government-set credit score minimums, but most lenders require at least a 620 to qualify.
USDA loans (for rural homebuyers)USDA loans are guaranteed by the US Department of Agriculture. These loans are only available to borrowers in eligible rural or suburban areas who meet certain income limits. You can use the USDA's eligibility map to see if the area you're buying your house in is eligible. The site also has a tool for determining if your income qualifies you for one of these mortgages.
Like VA mortgages, USDA mortgages allow no down payment but charge borrowers an upfront fee. The USDA loan fee is known as a guarantee fee and is equal to 1% of the loan amount. You'll pay a yearly fee equal to 0.35% of the loan amount as well.
Credit score requirements for USDA loans vary by mortgage lender. Typically, you'll need at least a 640 to qualify.
Other low down payment mortgage optionsIf you don't qualify for VA or USDA no down payment home loans, there are other strategies you can use to reduce the down payment you're required to pay. You can also seek help through various down payment assistance programs or from a loved one.
Options include:
FHA loansFHA loans are backed by the Federal Housing Administration. They allow down payments as low as 3.5% and have less stringent credit requirements, making them a good option for first-time homebuyers or those with rocky credit histories.
These mortgages come with both an upfront mortgage insurance premium of 1.75%, as well as an annual premium that equals between 0.45% and 1.05% of your loan amount.
Conforming loansMortgages that conform to Federal Housing Finance Agency loan limits and the standards set by Fannie Mae and Freddie Mac are known as conforming loans. With one of these mortgages, it's possible to buy a home with just 3% down.
To qualify, you may need to be a first-time homebuyer or meet income limits for your area. Conforming loans also require a credit score of at least 620 and, if you make a down payment of less than 20%, you may owe private mortgage insurance (PMI).
Lender-specific loan programsSome banks and mortgage companies may offer proprietary loan programs aimed at first-time homebuyers or those with small down payments.
These will vary widely, so be sure to shop around and compare several options if this is something you're looking for. You can look to banks, credit unions, mortgage companies, and online lenders for options.
First-time homebuyer grants and assistance programsCities, state housing agencies, and local nonprofits sometimes offer assistance programs that can help you cover the costs of your down payment or closing costs.
These may come in the form of grants, which don't need to be repaid, or low-interest loans, which you'll gradually pay back over time. In some cases, these loans may be forgivable as long as you live in the home for a certain length of time.
Preparing for the application processTo ensure you qualify for a no down payment mortgage, work on getting your credit score in a good place. If it's below the 620 to 640 mark, you can pay down your debts, dispute errors on your credit report, or ask for a credit line increase to improve your score. Paying your bills on time helps, too.
You should also reduce your debt-to-income ratio — or the share of your income your total monthly debt payments take up. This makes you less risky to lenders (you have fewer financial obligations and will be more likely to make your payments) and could make it easier to qualify.
Finally, gather up your financial documents, including your W-2s, pay stubs, bank statements, and past tax returns. Your lender will need these to determine what you can qualify for.
The costs of no down payment mortgagesThough you won't need a down payment with USDA and VA loans, they don't come for free. Both loans require upfront fees (funding fees for VA loans and guarantee fees for USDA loans). These act as mortgage insurance and protect your lender if you don't make your payments.
You might also get a higher interest rate when forgoing a down payment. This could increase both your monthly payment and your long-term interest costs significantly. Make sure you've adjusted your budget for these added costs when choosing one of these loans.
FAQsYes, certain government-backed mortgage programs allow eligible borrowers to obtain a mortgage without a down payment, though other costs like closing costs and higher interest rates may still apply. There are also loan programs that require very small down payments (as little as 3%, in some cases).
VA and USDA loans are the main no down payment options in the US. The VA loan program is only for military veterans, active service members, and select spouses, and the USDA loan program is for use in certain rural and suburban areas.
Credit score requirements vary by mortgage program and lender, but a score of 640 or higher is commonly needed for USDA loans, while VA loans usually require a 620 (though some lenders may allow for lower scores).
Forgoing a down payment may mean paying a higher interest rate and higher monthly payment on your mortgage. It may also mean paying extra fees.
To boost your chances of getting a no down payment loan, work on improving your credit score, reducing your debt-to-income ratio, and gathering you financial documents to strengthen your loan application
Molly Grace
Mortgage Reporter
Aly J. Yale is a writer and editor with more than 10 years of experience covering personal finance topics including mortgages and real estate. She contributes to Personal Finance Insider's mortgages and loans coverage.ExperienceAly began her journalism career as reporter, and later an editor, for several neighborhood sections of the Dallas Morning News.Her work has been published in several national publications, including Bankrate, CBS, Forbes, Fortune, Money, Newsweek, US News and World Report, the Wall Street Journal, and Yahoo Finance. She's also contributed to a variety of mortgage and real-estate publications, such as The Balance, Builder Magazine, Housingwire, MReport, and The Mortgage Reports. Her favorite personal finance tip is to schedule regular check-ins to make sure your credit cards, savings accounts, and other financial vehicles still align with your budget and financial goals. She is a member of the National Association of Real Estate Editors (NAREE).ExpertiseAly's areas of personal finance expertise include:Hyundai, Kia, And Subaru Offer The Best Electric SUV Lease Deals In July, Starts At $199/mo
July is finally here, and the deals are heating up. The best SUV lease deals in July are almost all fully electric models, including the Hyundai IONIQ 5, Kia Niro EV, and Subaru Solterra. Check out the new offers below.
Nearly all automakers saw a considerable surge in electric car sales over the past few months. Ford, GM, Hyundai, Kia, Subaru, and others had double or triple-digit sales growth. The growth comes after many introduced drastic price cuts over the past year to keep up with Tesla. According to vehicle data from S&P Global Mobility (via Automotive News), EV registrations grew 17% in April, accounting for 7.3% of light-duty vehicles. The report highlighted bonus cash, lease deals, and other offers that drove prices down and boosted growth. EV prices are nearly the same as gas-powered cars, but massive lease discounts are leading to cheaper lease deals. Three of the four best SUV lease deals in July are electric. Hyundai, Kia, and Subaru topped the list with monthly payments ranging from $199 to $329 per month.
2024 Subaru Solterra (Source: Subaru) Hyundai's IONIQ 5 topped the list again, according to online auto research firm CarsDirect, with a $10,000 lease incentive. The 2024 Hyundai IONIQ 5 SEL is listed at $259 per month for 33 months. The offer is for $3,999 due at signing, and 10,000 miles per year, for an effective rate of $380 per month. 
Hyundai IONIQ 5 (Source: Hyundai) You can lease the IONIQ 5 for the same price as a Hyundai Tucson, even though it's $18,000 more expensive. The 2024 Hyundai IONIQ 5 SEL offers up to 303 miles range and fast charging (10% to 80%) capabilities in 18 minutes. Hyundai is offering the promo until July 31, 2024. Kia's Niro EV was next on the list, with lease payments as low as $199 per month, which is $50 cheaper than last month. Best electric SUV lease models for July 2024 Per month rate Due at signing Effective cost per month 2024 Hyundai IONIQ 5 SEL $259 $3,999 $380 2024 Kia Niro EV Wind $199 $3,999 $336 2024 Subaru Solterra Premium $329 $329 $338 Best electric SUV lease deals July 2024 With $3,999 due at signing, the 2024 Kia Niro EV Wind has an effective cost of $336 per month. That's even cheaper than the hybrid model at $376 per month. You may have to act fast on this one, as Kia is only offering this deal until July 8, 2024. We'll keep you updated on Kia's latest offers. 
2024 Subaru Solterra (Source: Subaru) The Subaru Solterra also made the top SUV lease deals for July. Subaru is offering the 2024 Solterra Premium for $329 per month. With only $329 due at signing (first-month payment), the Solterra is nearly Subaru's cheapest vehicle to lease at just $18 more ($338) per month than the Impreza ($320). Subaru is also offering the deal until July 31, 2024. Are you ready to drive off in your new electric SUV at some of the lowest prices offered to date? We can help you get started. You can use our links below to find deals on Hyundai, Kia, and Subaru electric SUVs at a dealer near you. FTC: We use income earning auto affiliate links. More. When Does A No-down-payment Mortgage Make Sense? Experts Weigh In
A no-down-payment mortgage loan could be a good solution — but only for certain types of buyers, experts say. Getty Images Between rising home prices and today's high mortgage rates, buying a home has gotten very expensive. "Today's home affordability is the worst we've seen since the early '80s," says Neil Christiansen, branch manager and certified mortgage advisor at Churchill Mortgage.
Meanwhile, inflation and high interest rates have made it difficult for many prospective buyers to save up for a down payment. If you were putting down 20% on the average US home, you'd need nearly $88,000, according to Redfin data.
However, you don't always need to put down 20% on a home purchase. You might not even need to pay any money upfront. While not as widespread as traditional mortgages, no-down-payment mortgages do exist and could be helpful for some prospective buyers. However, these types of mortgage loans may not make sense in every situation.
Ready to buy a home? Compare your top mortgage loan options now.
When does a no-down-payment mortgage make sense? Experts weigh inThose who are eligible for a no-down-payment mortgage and can afford the monthly payments might benefit from not having to set aside so much money upfront.
"A no-down payment mortgage can be a great option for qualified borrowers who may not have the means to save for a down payment but have a stable income. This path could make sense when a homebuyer has limited liquidity but can comfortably afford the monthly payments and other homeownership costs, such as insurance, property taxes, and maintenance," says Chris Birk, vice president of mortgage insight at Veterans United Home Loans.
A no-down-payment mortgage can also make sense if you want more money to invest aside from putting money into real estate.
"Although there are a few loan programs offering zero down payment, in today's high interest rate and elevated-price environment, it can be a challenge for buyers to get approved," says Christiansen.
But if you can qualify for one, Christiansen says, then you could potentially grow your net worth by investing the money that would have gone toward the down payment into stocks, bonds or other assets.
One option for a no-down-payment mortgage could be a Department of Veteran's Affairs (VA) loan.
"For many veterans and service members, VA loans offer a secure path to homeownership with no down payment required. About three-quarters of VA buyers bought a home last year without making a down payment," says Birk.
"Another route is the USDA loan, which is available in eligible rural and suburban areas and offers a no-down payment mortgage option," he adds.
It's also possible to find a private mortgage lender offering a no-down-payment mortgage, though that could involve structures like a government-backed, low-down-payment mortgage paired with another loan to cover the remaining down payment amount.
Regardless of the source, if you're comfortable with the mortgage terms, having no down payment could help some buyers. For example, it can be a smart choice if you have a stable income, good credit and a low debt-to-income ratio, experts say.
That's because, in today's tight housing market, you may not have the opportunity to save for a down payment, as buying sooner rather than later can be advantageous. However, you'll typically need a solid borrower profile and a good credit history to obtain a no-down-payment mortgage.
Explore the top mortgage loan rates available to you here.
When does a no-down-payment mortgage not make sense?Despite the upside of no-down-payment mortgages, there are some possible disadvantages to weigh first.
"The no-down-payment talk seems to have run rampant on the internet. This is not a new product, and it's not widely available," says Kevin Leibowitz, founder, mortgage broker at Grayton Mortgage, Inc. And the terms of these loans can be a bit much, he adds.
For example, you might end up with higher monthly payments compared to a regular mortgage, aside from just the difference in the loan amount. That's because no-down-payment mortgages often come with higher interest rates and require private mortgage insurance (PMI), both of which can lead to higher monthly payments.
And, having no equity in your home can be risky. If the property values decrease in your area, you could end up upside down on your home. Owing more than your property's worth could cause issues like making it difficult for you to move or refinance your mortgage. So, you might not want to take on the risk.
"It may not be the best choice if the homebuyer's financial situation is unstable, or if they are not prepared for the long-term financial commitment of owning a home. Would-be homebuyers who are struggling with high debt levels or inconsistent income may find that the added financial responsibility of a mortgage without an equity cushion is too much to handle," says Birk.
"Additionally, in some competitive markets, sellers might prefer offers with a down payment, as they see them as more financially secure," he adds.
Other low-down-payment mortgage options to considerNo-down-payment mortgages have their appeal, but there are other ways to buy a home without a big down payment.
"Both conventional and FHA loans offer low down payment loans, anywhere from 3% for first-time buyers with a conventional loan and 3.5% on FHA for first-time and existing buyers. To use conventional financing and be an existing buyer, a 5% down payment loan is available," says Christiansen.
Some of these loans still have relatively narrow eligibility requirements, but they can still be more widespread than no-down-payment options.
"Lenders may offer conventional mortgage products with 3% down payments through programs like Fannie Mae's HomeReady and Freddie Mac's Home Possible, which are designed to help low- to moderate-income buyers," says Birk.
You also might qualify for programs that help you afford your down payment in the first place. For example, down payment assistance programs can provide grants for your down payment. And, that can help new or lower-income buyers get into their first homes.
The bottom lineNo-down-payment mortgages can be helpful for some buyers, such as those with plenty of income and solid credit but who lack the savings for a down payment. However, these mortgages can also increase costs and come with higher risk. As such, other options like low-down-payment mortgages or down payment assistance programs could be worth exploring.
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