Can you buy a house without a down payment? What to know

For many prospective buyers, saving enough to afford a down payment is the biggest obstacle to homeownership. Historically, lenders required a payment of at least 20% — a major ask for what’s likely to be the biggest purchase of your life.

But times have changed. Many lenders are now willing to accept payments well below 20%, and government-backed programs, like the U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), and Federal Housing Administration (FHA) loans, lower the bar even further. 

But can you actually buy a house without a down payment at all? 

Is purchasing a house with no money down possible?

It might sound too good to be true, but yes — in some cases, home buying with no down payment is an option for certain borrowers. 

For example, lenders may accept deposits as low as 3% for first-time homebuyers. And some government-sponsored loans, like VA and USDA, can bring that number all the way down to zero. 

What’s a zero-down mortgage?

A zero-down mortgage doesn’t require any money upfront and is only available through certain government-backed programs, like VA and USDA loans. The “government-backed” part means that if you ever can’t make your mortgage payments, the government provides insurance to the lender to help cover their loss. 

This protects the lender, not you, and doesn’t change the fact that you didn’t need a down payment at the start.

Keep in mind, though, that zero down doesn’t mean no upfront fees. You’ll still need to budget for expenses like closing costs, prepaid property taxes, and potentially private mortgage insurance premiums.

What are the options for purchasing a home without a down payment?

At this point, you’re probably wondering: “How do I qualify for a zero-down mortgage?” To help make sense of your possibilities, let’s take a closer look at the two most well-known paths. 

VA loans

VA loans are what eligible veterans can use to buy a home without the financial burden of any down payment at all. You may qualify if you have: 

— Served 90 consecutive days as an active-duty service member during wartime

— Served 181 days as an active-duty service member in peacetime

— Served over six years in the National Guard or Reserves

— Are the surviving spouse of a military member who died in active service or from a service-related disability

The VA doesn’t mandate a specific credit score for these loans. Instead, individual lenders set their own minimums — most require at least 620, though some may accept scores as low as 500.

Better offers home loans with zero down payments to qualified veterans. By choosing Better, you get competitive interest rates, 24/7 customer support, and no hidden fees. Get pre-approved in as little as three minutes to find out how much you can afford and how much you could save.

...in as little as 3 minutes – no credit impact

USDA loans

USDA loans offer zero-down mortgages to low and moderate-income residents of rural areas. There are two types: guaranteed USDA loans and direct USDA loans. To check if you qualify, simply enter your address on the website. 

Apart from living in an eligible area, income limits are the primary qualification factor. For guaranteed loans, your income must be no more than 115% of the area median income (AMI). Direct loans are capped at 80% of the AMI. USDA loans require mortgage insurance, which comes as a one percent upfront guarantee fee and a 0.35% annual fee over the life of the loan.

Like other government programs, the USDA doesn’t demand a specific credit score.

FHA loans

Similarly, FHA loans serve low to moderate-income borrowers, but they don’t have a zero-down option. To qualify, you typically need a credit score of 580 or above and a minimum down payment of 3.5%. Those with scores as low as 500 can still get an FHA loan, but their down payment increases to 10%.

You may also take advantage of FHA loans with down payment assistance and grants from your state and local government to help cover the upfront costs.

Pros and cons of zero-down mortgages

Buying a house with no down payment is an option for some homebuyers — but is it a good one? This depends on your financial situation and goals. Here are some key benefits and drawbacks to consider.

Pros

— Becoming a homeowner with limited savings: Zero-down mortgages open up homeownership to borrowers who may struggle to save enough for a traditional down payment. 

— Preserving existing savings for other needs: Skipping a down payment keeps money in your pocket for other expenses like moving costs and home improvements, which could otherwise quickly eat into your savings.

Cons

— Higher monthly payments: Financing the full value of a home from the start increases your loan balance. This means your monthly payments will be larger, too.

— Starting with no equity: When you put no money down for a house purchase, your equity starts at zero, though it grows with each monthly payment.

3 options for mortgages with low down payments

If you can’t buy a house with zero down, you can still lower the amount you need upfront — especially if you have a strong credit profile. Here are three of the best choices for low-down-payment mortgages.

1. Fannie Mae HomeReady loans

HomeReady mortgages are conventional loans geared toward low-income borrowers. To qualify, your income can’t exceed 80% of your area’s AMI. You’ll find annual data by metropolitan area, county, and household size using Fannie Mae’s income lookup tool. Borrowers are also required to take a homebuyer education class.

Community Seconds is another relevant Fannie Mae program. It allows homebuyers to cover expenses such as the down payment and closing costs through secondary financing from nonprofits, employers, and state and local agencies. Some loans even include deferred payments or forgiveness.

2. Freddie Mac Home Possible loans

Home Possible loans are essentially Freddie Mac’s version of HomeReady loans. They have the same maximum income limit of 80% AMI, and you can finance up to 97% of the home’s value. Affordable Seconds is Freddie Mac’s counterpart. It works much like Community Seconds, letting eligible buyers access subordinate financing from similar sources for costs such as origination fees and prepaid taxes.

3. Conventional loans

A conventional loan is a mortgage that the government doesn’t guarantee or insure. Private lenders — including banks and credit unions — originate, fund, and service these loans. 

Conventional loans come in two main types:

— Conforming loans are for those who meet guidelines set by Fannie Mae and Freddie Mac. Borrowers with strong credit can benefit from conforming loans since they typically provide lower interest rates.

— Non-conforming loans are for those who don’t meet Fannie Mae or Freddie Mac standards. These often include jumbo loans, portfolio loans, and mortgages that exceed the Federal Housing Agency’s maximum limit for a given market.

In general, qualifying for a conventional loan can be harder than for a government-backed mortgage due to stricter credit score and down payment standards.

Pros and cons of mortgages with low down payments

A small down payment comes with similar benefits and drawbacks to zero-down financing. Here are a few factors to think about.

Pros

— Flexible credit requirements: Mortgages with lower down payment requirements often evaluate credit more leniently. 

— Faster path to homeownership: The smaller the down payment, the easier it is to save. This helps you move into a home sooner.

Cons

— Less favorable interest rates: Lenders like a sizable down payment because borrowers with more equity are less likely to miss payments. With a lower down payment, the lender may charge higher interest rates to offset that added risk.

— Mortgage insurance: Many home loans require mortgage insurance when the down payment is below 20%. This protects the lender in case the borrower fails to make payments.

How to purchase a home with no or minimal money down: 3 steps

If you’re aiming for a home with a low or no down payment, shopping around for the right mortgage and understanding your options can help you save money upfront. Here are three simple steps to make the most of your purchase.

1. Compare interest rates and terms

The interest you pay on your mortgage is your biggest expense other than paying off the loan balance itself. So, cast a wide net to find a reputable lender that can give you the lowest rate your credit allows.

Start by checking local banks, credit unions, and online lenders, and use comparison websites like Better to see multiple offers side by side. Doing a little research upfront can help you secure the best deal and protect your savings.

2. Read the fine print

Before moving forward with a lender, ask for a complete breakdown of their fees. Closing costs, origination fees, and other charges can add up fast, so knowing the details upfront helps you avoid surprises and better compare offers.

3. Review customer feedback

Even if a lender offers you good terms, check online review boards like Reddit and Google to find out what people are saying before committing. Negative feedback and repeated complaints can be a red flag, guiding you away from lenders that might cause headaches down the road.

Accelerate your homebuying journey with Better

Homebuyers no longer have to spend years saving for a huge down payment to purchase property. Some conventional loan providers accept as little as 3%, and government programs let you sidestep the down payment entirely.

Better helps you start your journey to homeownership faster than you ever expected with conventional, VA, and FHA loan options. Complete our fully online pre-approval application in as little as three minutes, and finalize the deal in an average of 32 days.

Get pre-approved with Better today to see how painless buying your dream home can be.

...in as little as 3 minutes – no credit impact