Yes, but only through specific loan programs that exist for this purpose
You can buy a home without putting money down, but only if you meet the requirements of a loan program designed to allow it. These programs exist—they are not theoretical—but they come with trade-offs: higher interest rates, mandatory mortgage insurance, stricter income and credit requirements, or a combination of all three. The most common no-down-payment paths are VA loans (for military veterans), USDA loans (for rural properties), and some conventional loans with lender-paid mortgage insurance.
The catch is that "no down payment" does not mean "no money out of pocket." You still pay closing costs, which typically run 2 to 5 percent of the home price. Some programs roll these into the loan; others require you to cover them upfront or negotiate with the seller to pay them on your behalf.
Key Takeaways
- VA loans and USDA loans are the most straightforward no-down-payment options, but VA loans require military service and USDA loans require a property in a designated rural area.
- Conventional loans can be structured with zero down, but you will pay mortgage insurance premiums monthly and face higher interest rates than borrowers with 20 percent down.
- Closing costs (2 to 5 percent of the purchase price) are separate from the down payment and must be paid or financed regardless of which program you use.
- Lenders will scrutinize your income, credit score, and debt-to-income ratio more closely on no-down-payment loans because you have no equity cushion if the home loses value.
VA loans: no down payment if you have military service
A VA loan is issued by a private lender but may provide by the Department of Veterans Affairs. It requires zero down payment and does not require mortgage insurance, which saves you hundreds of dollars per month compared to conventional loans. You must have served on active duty, be a surviving spouse of a service member, or meet other specific military service criteria. The VA issues a Certificate of may be able to access that proves your status; you request this from the VA website or through your lender.
VA loans have a funding fee (typically 1.25 to 3.3 percent of the loan amount) that you pay upfront or roll into the loan. This fee goes to the VA, not to a private insurer. Interest rates on VA loans are often lower than conventional rates because the government may provide reduces the lender's risk. You still pay closing costs, though VA rules limit what lenders can charge you.
The main limitation is that VA loans can only be used to purchase a primary residence or a multi-unit property (up to four units) where you will live. You cannot use a VA loan to buy an investment property or a vacation home.
USDA loans: no down payment for rural and some suburban properties
A USDA loan is backed by the U.S. Department of Agriculture and requires zero down payment for properties in designated rural areas. The USDA defines "rural" broadly—it includes many towns and suburbs, not just farmland. You can check whether a specific address qualifies on the USDA website by entering the property address. Income limits apply and vary by county; most programs cap household income at 115 percent of the area median income.
Like VA loans, USDA loans do not require a traditional down payment but do carry a may provide fee (typically 1 to 2 percent) that you pay upfront or finance into the loan. You also pay an annual mortgage insurance premium for the life of the loan, which is higher than the insurance on conventional loans. Your credit score must typically be 580 or higher, though some lenders require 620 or better.
USDA loans are slower to process than conventional loans because the USDA must verify the property location and your income. Plan for 45 to 60 days from application to closing, compared to 30 to 45 days for a conventional loan.
Conventional loans with lender-paid mortgage insurance
A conventional loan with zero down is possible through some lenders, but you will pay for it. The lender covers the mortgage insurance premium upfront and passes the cost to you through a higher interest rate—typically 0.5 to 1 percent above what you would pay with 20 percent down. Over the life of a 30-year loan, this adds tens of thousands of dollars in interest.
You will also pay private mortgage insurance (PMI) monthly until you reach 20 percent equity in the home. On a $300,000 home with zero down, PMI might run $200 to $400 per month. This insurance protects the lender, not you, and does not build equity.
Conventional no-down loans require a credit score of 620 or higher (many lenders prefer 640+), stable income, and a debt-to-income ratio below 43 percent. Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income. If you earn $5,000 per month and already owe $2,000 in car loans, student loans, and credit cards, adding a $2,100 mortgage payment would put you at 82 percent—well over the limit.
What closing costs cover and who pays them
Closing costs include the lender's origination fee, appraisal, title search, title insurance, property survey (if required), homeowners insurance, property taxes, and recording fees. These typically total 2 to 5 percent of the purchase price. On a $250,000 home, closing costs might range from $5,000 to $12,500.
On a no-down-payment loan, you have three options: pay closing costs out of pocket, ask the seller to cover them as part of the purchase negotiation, or finance them into the loan (which increases your monthly payment and the total interest you pay). Some programs, like VA loans, limit how much the seller can contribute. USDA loans allow the seller to pay up to 6 percent of the purchase price toward closing costs.
If you finance closing costs into the loan, you are borrowing money to pay the cost of borrowing money. A $10,000 closing cost financed over 30 years at 7 percent interest will cost you roughly $23,600 by the time you pay off the loan.
Credit score and income requirements vary by program
VA loans typically require a credit score of 580 or higher, though most lenders prefer 620+. Income requirements are less strict than conventional loans because the VA may provide reduces the lender's risk. You must have a debt-to-income ratio below 41 percent, though some lenders will go to 50 percent if you have strong compensating factors (high savings, stable employment history).
USDA loans require a minimum credit score of 580, but many lenders require 620 or better. Income limits are the main barrier: you must earn no more than 115 percent of the area median income for your county. A family of four in a rural county might have a $90,000 income limit; in a more expensive area, the limit could be $130,000.
Conventional no-down loans are the strictest. Most lenders require a credit score of 640 or higher and a debt-to-income ratio below 43 percent. If you have recent late payments, collections, or a bankruptcy within the past two years, you will likely be denied.
How interest rates and total cost compare
Interest rates on no-down-payment loans are higher than rates on loans with a substantial down payment. The difference depends on the program and the lender, but here is the general pattern:
- VA loans: often the lowest rates because the government may provide is strong.
- USDA loans: rates are typically 0.25 to 0.5 percent higher than VA loans.
- Conventional no-down loans: rates are typically 0.5 to 1 percent higher than a conventional loan with 20 percent down.
On a $300,000 loan, a 0.5 percent rate difference costs you roughly $150 per month in additional interest. Over 30 years, that is $54,000 more. Add mortgage insurance (if required), and the total cost of borrowing with no down payment can be $100,000 to $150,000 more than borrowing with 20 percent down.
The trade-off is that you buy a home sooner instead of saving for years. Whether that trade-off makes sense depends on your timeline, local rent prices, and whether home values in your area are rising faster than you can save.
Frequently Asked Questions
Can I use a no-down-payment loan if I have bad credit?
Most no-down-payment programs require a credit score of at least 580 to 620. If your score is below 580, you will likely be denied. If your score is between 580 and 620, you may find a lender, but expect a higher interest rate and stricter income requirements. Improving your credit score before applying will lower your interest rate and monthly payment.
What happens if the home value drops after I buy it?
If you have zero equity and the home loses value, you could end up owing more than the home is worth (called being "underwater"). This makes it difficult to sell or refinance. With a down payment, you have a buffer. This risk is why lenders charge higher rates and require mortgage insurance on no-down loans.
Can I use a no-down-payment loan to buy a second home or investment property?
VA loans can only be used for a primary residence. USDA loans can only be used for a primary residence. Conventional no-down loans can technically be used for investment properties, but lenders are much stricter about income and credit requirements, and interest rates are higher.
Do I have to pay mortgage insurance forever on a no-down-payment loan?
On conventional loans, mortgage insurance drops off once you reach 20 percent equity (either through payments or home appreciation). On USDA loans, mortgage insurance is required for the life of the loan. On VA loans, there is no mortgage insurance at all—only the upfront funding fee.
What if I cannot afford the closing costs even with a no-down-payment loan?
You can ask the seller to pay closing costs as part of the purchase agreement, or you can finance them into the loan. Both options increase your total cost, but they allow you to close without cash out of pocket. Some programs limit how much the seller can contribute, so check your specific loan program's rules.