By Grant Edrington – Updated May 10, 2023
Buying a house with no money down may seem like an impossible task, but it’s doable with the right strategies and resources. This is good news for first-time homebuyers who are looking for ways to enter the housing market without breaking the bank.
In some cases, it may be possible to secure a mortgage with zero down payment. To help you better understand if you may be eligible to purchase a home without a downpayment, we’ll share a variety of programs and options for you to explore. We’ll also offer you some tips and tricks to help navigate the homebuying process. Let’s get started on making your homeownership dreams a reality!
Here are some of the steps and programs we’ll cover to help you learn more about purchasing a home without a down payment on a mortgage:
- Can You Buy a House With No Money Down?
- How to Buy a House With Zero Down Payment
- No Down Payment Home Loans
- USDA Loans
- VA Loans
- Low Down Payment Home Loans
- Conventional Loans
- FHA Loans
- Fannie Mae HomeReady Mortgage Loans
- Freddie Mac Home Possible Mortgage Loans
- Community Affordable Loan Solution
- Save For a Down Payment with Divvy
- FAQs About Buying a Home With No Money Down
Can You Buy a House With No Money Down?
Most first-time homebuyers will have to pay a down payment that’s a minimum of 3% to 3.5%, which is required for conventional or FHA loans – the more common mortgage types. While zero-down home loans do exist, they’re usually reserved for specific groups like veterans and rural homebuyers who earn a lower-to-moderate income. However, the good news is that every state offers several forms of homebuyer assistance programs, including government grant programs that can cover your down payment, so you don’t have to pay out of pocket.
As a buyer, it’s important to remember that you’ll also need to pay closing costs, which can sometimes cost more than your down payment. However, there are ways to cover some or all of these fees. Be sure to discuss options with your loan officer to reduce your out-of-pocket expenses.
How to Buy a House With Zero Down Payment
If you’re looking to buy a house with no money down, using a government-backed mortgage can be the easiest option. The VA loan and USDA loan programs are great examples, as both allow a $0 down payment. However, keep in mind that not everyone will qualify for these programs due to geographical-, income-, or military-related requirements.
But don’t worry, you still have other options to explore if these programs aren’t a fit for you. Here are some approaches to consider:
- Apply for a VA or USDA loan, if eligible.
- Take advantage of government assistance programs to cover your down payment.
- Ask a family member for a down payment gift.
- Request that your lender pay your closing costs (also known as “lender credits”).
- Negotiate with the seller to pay your closing costs (known as “seller concessions”).
By combining these tactics, you could potentially buy a house with little to no cash out-of-pocket.
No Down Payment Home Loans
Let’s take a closer look at two government-backed loan options for homebuyers: USDA loans and VA loans.
USDA loans are backed by the United States Department of Agriculture, which encourages development in rural and suburban areas. To qualify, both you and your home must meet certain criteria.
First, your home must be in a rural or suburban area; you can check the USDA’s map of eligible areas to see if your home qualifies. Additionally, your home must be a single-family unit that you’ll use as your primary residence and cannot be a working farm.
You’ll also need to meet certain financial requirements. The combined gross income in your household cannot exceed 115% of the median income of the area your home is in, your debt-to-income ratio shouldn’t be higher than 45%, and you should have a FICO® Score of at least 640 for the best chance of qualification.
VA loans are available to active-duty service members, veterans, and surviving spouses. These loans may cover up to 100% of the home’s appraised value. Although a one-time funding fee is required, it can be financed into the loan amount. These funding fees take the place of mortgage insurance, making this a much more appealing and affordable option for prospective homeowners.
VA loans do not require a downpayment or minimum credit score. In order to be eligible, the home you are purchasing must be your primary residence.
To qualify for a VA loan, you’ll need to meet any one of the following service requirements, which can vary in some cases based on dates of service:
- 90 consecutive days of active service during wartime
- 181 consecutive days of active service during peacetime
- More than 6 years of service in the National Guard or Reserve, or at least 90 days under Title 32 orders (with at least 30 of those days being consecutive)
- You were discharged by reason of service-connected disability
- You’re the qualifying spouse of a service member who died in the line of duty or from a service-related disability
Low Down Payment Home Loans
If you don’t qualify for a zero-down mortgage, don’t worry! Several low down payment home loan options are available to help you buy a home. Here are some options to consider.
There’s a common misconception that to get a conventional loan, which is not insured by the government, you need a 20% down payment. However, depending on your lender, you could qualify for a loan with as little as 3% down if you’re a first-time homebuyer who hasn’t owned real estate in the last three years. That said, it’s important to note that a lower down payment likely means that you’ll have higher monthly payments and that you’ll also pay more interest over the lifetime of your loan.
The confusion often stems from the private mortgage insurance (PMI) requirement, which your lender may require if your down payment is less than 20% of the loan amount. PMI gives your lender protection if you stop making loan payments, and while you pay for it, it offers no benefits to you.
Homeowners typically aim to cancel PMI as soon as possible, which can be done by contacting your lender and requesting cancellation once you’ve reached 20% equity in your home based on payments.
FHA loans are backed by the Federal Housing Administration and are designed for low-to-moderate-income individuals who can put down as little as 3.5%. These loans have fewer requirements compared to USDA and VA loans. For example, you only need a minimum credit score of 500 in order to qualify for an FHA loan, however, in order to qualify for a 3.5% down payment, you’ll need to have a score of at least 580. However, an FHA loan does not require you to have been an active or retired member of qualifying branches of the U.S. military, or limit you to purchasing a home in a rural area.
Additionally, FHA loans require that you must live in the home you’re purchasing as your primary residence and move in within 60 days of closing.
Keep in mind that if your down payment is less than 10%, you will likely need to make mortgage insurance payments until the loan is fully paid off. However, some people use an FHA loan, wait until they have 20% equity in their property, and then refinance to a conventional loan to eliminate the lifetime mortgage insurance requirement.
Looking for more information about FHA loans? Our FHA loans overview can help.
Fannie Mae HomeReady Mortgage Loans
Fannie Mae HomeReady mortgage loans are designed to help low-to-moderate-income borrowers buy a home. With a credit score of 620 or higher, you could be eligible for a 3% down payment. However, if you’re a first-time homebuyer, you’re required to complete a homebuyer education course. All applicants can submit their income for consideration, improving their chances of approval.
Another benefit of HomeReady loans is that there are no minimum personal contribution requirements for the down payment, which means you can cover it through gifts, grants, and other DPA programs. However, like many other loans, HomeReady mortgages require mortgage insurance. The good news is that you can cancel the insurance once you’ve reached 20% equity in your home.
Freddie Mac Home Possible Mortgage Loans
If you’re looking for a low down payment mortgage, Freddie Mac’s Home Possible loans might be a good option for you. With a minimum down payment of 3%, there are no personal cash requirements for funding the down payment. However, to qualify for Home Possible loans, you’ll need a credit score of at least 660, and your income cannot exceed 80% of the area median income (AMI), which can be found on the Freddie Mac website.
It’s important to note that Home Possible mortgages may require mortgage insurance. However, you can cancel the policy once you’ve reached 20% equity in your home.
Community Affordable Loan Solution
A relatively new option, Bank of America’s Community Affordable Loan Solution program is offered to first-time home buyers in predominantly Black/African-American and Hispanic/Latino neighborhoods throughout:
- Charlotte, NC
- Dallas, TX
- Detroit, MI
- Los Angeles, CA
- Miami, FL
The Community Affordable Loan Solution does not require first-time home buyers to put money towards a down payment or closing costs. Eligibility is determined by the prospective homeowner’s location and income and does not require a minimum credit score in order to participate. People of all racial backgrounds and ethnicities are welcome to apply.
The program does require an evaluation of prospective homeowners’ credit history, including timely payment of responsibilities such as rent, utilities, phone bills, and auto insurance.
Additionally, prospective applicants must complete a homebuyer certification course approved by both Bank of America and HUD in order to minimize the risk of defaulting on a mortgage or foreclosure.
One of the defining features of this program is that the Community Affordable Loan Solution does not require mortgage insurance premiums, which often puts prospective low-income buyers at a disadvantage and provides an added barrier to homeownership.
Save For a Down Payment with Divvy
If you’re a homebuyer who can’t afford the upfront down payment for a traditional mortgage, Divvy is another option to consider. Divvy helps aspiring homeowners live in their dream home and build toward their homeownership goals, like a down payment, by allowing them to make ongoing savings contributions while they rent. The best part? These contributions can appreciate over time, helping you save more towards home ownership if you choose to purchase the home from Divvy.
Divvy requires a minimal initial down payment of just 1-2% of the purchase price to get started. You can then make ongoing savings contributions that could be used at the end of the lease and put towards your homeownership goals, like a down payment on a home. This can be a great option for homebuyers who need some help saving for a down payment and want to make sure they’re investing in their future.
If after a few years, you decide you do not want to purchase your home, you can walk away with your Divvy savings, minus a relisting fee of 2% of the initial purchase price.
FAQs About Buying a Home With No Money Down
How can I buy a house if I don’t have much money?
There are several options available for homebuyers with limited funds, such as government-backed loans, low down payment mortgages, and down payment assistance programs.
What credit score is needed to buy a house with no money down?
The credit score requirement varies depending on the type of loan you’re applying for. For example, FHA loans typically require a credit score of 580 or higher, while VA loans may have more flexible credit requirements. Read more of our tips on how to buy a home with bad credit.
Is 0% down a good idea?
It depends on your financial situation and goals. While a zero-down loan can help you get into a home sooner, it can also come with higher interest rates and fees. Consider your long-term financial plans before deciding.
How can I save money for a down payment?
There are several ways to save for a down payment, such as creating a budget, cutting expenses, and setting up automatic savings contributions. You can also consider down payment assistance programs and employer-sponsored homeownership benefits.
Should I put 20% down on a home?
While putting 20% down can help you avoid private mortgage insurance (PMI) and lower your monthly payments, it’s not always necessary. There are many low down payment options available, so consider your financial goals and the long-term costs of your mortgage before deciding on a down payment amount.
- U.S. Department of Housing and Urban Development: FHA Loans
- U.S. Department of Veterans Affairs: VA Home Loans
- U.S. Department of Agriculture – Rural Development: Single Family Housing Guaranteed Loan Program
- U.S. Department of Housing and Urban Development: State Information
- U.S. Department of Agriculture – Rural Housing Services: Property Eligibility
- U.S. Department of Veterans Affairs: VA Home Loan Eligibility Requirements
- Consumer Financial Protection Bureau (CFPB): Conventional Loans
- Consumer Financial Protection Bureau (CFPB): What is private mortgage insurance (PMI)?
- Fannie Mae: HomeReady Mortgage
- Fannie Mae: Homeownership Education
- Freddie Mac Home Possible Mortgage
- Bank of America: BoA Introduces Community Affordable Loan Solution to Expand Homeownership Opportunities in Black/African American and Hispanic-Latino Communities
- Bankrate: Bank of America targets minority homeownership with mortgage program
- Bankrate: U.S. mortgage statistics and FAQ (https://www.bankrate.com/mortgages/mortgage-statistics/#data)
Grant is a member of the marketing team and focuses on connecting aspiring homeowners in our metros with Divvy. He's worked on marketing teams spanning all parts of the homeownership journey, including home loans, power tools and home improvement, siding and flooring, and now Divvy. Grant graduated from Villanova University and became a homeowner in 2021.