No-down-payment mortgages exist, but they come with real trade-offs
You can get a mortgage without putting money down, but lenders will charge you more for the risk. The most common route is a VA loan if you are military or a veteran — these have no down payment requirement and no mortgage insurance. If you do not may have access to for VA, USDA loans in rural areas also allow zero down. For conventional mortgages, you will need to pay private mortgage insurance (PMI), which adds to your monthly payment and typically stays until you reach 20 percent equity. Some lenders offer no-down programs, but they usually require a higher credit score, a lower debt-to-income ratio, or both.
The real cost is not just the down payment you avoid — it is the interest rate premium and insurance you pay instead. A lender taking on a loan with no equity cushion charges more to cover the risk that you walk away or default. That premium compounds over 15 or 30 years.
Key Takeaways
- VA loans and USDA loans allow zero down payment; conventional loans with zero down require private mortgage insurance, which raises your monthly cost.
- A no-down conventional mortgage usually demands a credit score of 680 or higher and a debt-to-income ratio below 43 percent.
- Private mortgage insurance stays on your loan until you build 20 percent equity, which takes years even if you make extra payments.
- The interest rate on a no-down loan is typically 0.25 to 0.5 percent higher than on a loan with 20 percent down, costing tens of thousands over the life of the loan.
VA loans: zero down if you served
If you are a veteran, active-duty service member, or surviving spouse of a service member, a VA loan through the Department of Veterans Affairs requires no down payment and no mortgage insurance. The VA guarantees a portion of the loan to the lender, which is why the lender accepts the risk. You do pay a one-time funding fee — usually 2.3 percent of the loan amount for first-time users, though it can be waived if you receive disability compensation from the VA. That fee can be rolled into the loan amount, so you do not pay it upfront.
VA loans also have no prepayment penalty, meaning you can pay off the loan early without a fee. The interest rate is often lower than a conventional loan at the same credit level because the VA may provide reduces the lender's risk. You will need a Certificate of may be able to access (COE) from the VA, which you can request online through VA.gov or through your lender.
The catch: you can only use a VA loan once at a time. If you sell the home and pay off the loan, your entitlement restores and you can use it again. But you cannot have two VA loans open simultaneously.
USDA loans in rural areas
The USDA Rural Development Loan Program offers mortgages with zero down payment for homes in designated rural areas. The USDA defines rural broadly — it includes towns of 10,000 to 50,000 people and some areas just outside city limits. You can check whether your address qualifies on the USDA website by entering your zip code.
Like VA loans, USDA loans do not require a down payment, but you do pay an upfront may provide fee (around 1 percent of the loan) and an annual fee (0.35 percent of the loan balance). These can be rolled into the loan. The interest rate is competitive, and there is no mortgage insurance requirement. Credit score requirements are typically 580 or higher, though some lenders ask for 640.
USDA loans have income limits that vary by county. A household earning more than the area median income may not may have access to. You also cannot use the loan to buy a second home or investment property — it must be your primary residence.
Conventional mortgages with no down payment
Some conventional lenders offer zero-down mortgages, but the requirements are stricter than for a loan with 10 or 20 percent down. You typically need a credit score of 680 to 700 or higher, a debt-to-income ratio below 43 percent, and stable income history. Some lenders require two years of tax returns and may ask for a larger cash reserve (three to six months of mortgage payments in savings).
The trade-off is private mortgage insurance (PMI). PMI protects the lender if you default; it does not protect you. The cost ranges from 0.5 to 1.5 percent of the loan amount per year, depending on your credit score, the loan-to-value ratio, and the lender. On a $300,000 loan, that is $1,500 to $4,500 per year, or $125 to $375 per month. PMI stays on the loan until you reach 20 percent equity — which on a $300,000 home means you need $60,000 in equity. If you put nothing down and make standard payments, that takes 8 to 12 years.
You can remove PMI faster by making extra principal payments or by refinancing once you have 20 percent equity. But refinancing costs money (typically $2,000 to $5,000 in closing costs), so you need to calculate whether the savings are worth it.
Interest rate premiums on zero-down loans
Lenders charge a higher interest rate for a zero-down loan than for one with 20 percent down. The premium is usually 0.25 to 0.5 percent, though it can be higher if your credit score is below 700. On a $300,000 mortgage over 30 years, a 0.5 percent rate increase adds roughly $50,000 to the total interest you pay.
This premium exists because the lender has no equity cushion. If the home value drops and you default, the lender loses money immediately. With 20 percent down, the home can drop 20 percent in value before the lender is underwater. With zero down, any decline puts the lender at risk.
When comparing loan offers, ask the lender for the interest rate on a zero-down loan and on a 20-percent-down loan at the same credit level. The difference shows you the actual cost of avoiding the down payment.
How to improve your odds of approval
If you want a conventional zero-down mortgage, lenders look at your credit score, income stability, and debt load. A score of 700 or higher makes approval much more likely. If your score is below 680, you may not find a lender willing to go zero down, or the rate premium will be steep.
Your debt-to-income ratio (total monthly debt payments divided by gross monthly income) should be below 43 percent. This includes your new mortgage payment, car loans, student loans, credit cards, and any other monthly obligations. If you are at 50 percent or higher, paying down debt before you apply will improve your chances.
Lenders also want to see stable income. If you are self-employed, expect to provide two years of tax returns and possibly a profit-and-loss statement. If you changed jobs recently, some lenders want a letter from your new employer confirming your salary and start date. A larger cash reserve — money in savings after closing — also strengthens your application.
The total cost: down payment versus PMI and rate premium
Putting zero down saves you cash today but costs you money over time. Here is a rough comparison on a $300,000 home:
| Scenario | Down Payment | Interest Rate | PMI (monthly) | Total Interest Paid (30 years) |
|---|---|---|---|---|
| 20% down | $60,000 | 6.5% | $0 | ~$247,000 |
| 0% down | $0 | 7.0% | $250 | ~$315,000 |
In this example, the zero-down borrower pays $60,000 less upfront but $68,000 more in interest and PMI over 30 years. The break-even point depends on how long you keep the home. If you sell in five years, the zero-down route may cost less overall because you avoid the large upfront payment. If you stay 15 years or longer, the 20-percent-down loan usually wins.
Frequently Asked Questions
Can I get a zero-down mortgage with a credit score below 680?
Most conventional lenders will not offer zero-down mortgages to borrowers with scores below 680. VA and USDA loans have lower score requirements — VA typically accepts 580 or higher, and USDA is similar — but these programs have their own restrictions (military service for VA, rural location for USDA).
How long does PMI stay on my loan?
PMI stays until you reach 20 percent equity in the home. On a zero-down loan, this typically takes 8 to 12 years of standard payments. You can remove it faster by refinancing once you have 20 percent equity, but refinancing costs money and only makes sense if the interest rate savings outweigh the closing costs.
Can I remove PMI by making extra principal payments?
Yes. If you make extra payments toward principal, you build equity faster and can reach 20 percent sooner. Some lenders allow you to request PMI removal once you hit 20 percent equity, even if you have not reached the halfway point of the loan term. Ask your lender about their PMI removal policy before you sign.
What is the difference between a VA loan and a conventional zero-down loan?
VA loans have no mortgage insurance, no prepayment penalty, and typically lower interest rates. Conventional zero-down loans require PMI, which adds $100 to $400 per month. If you may have access to for a VA loan, it is almost always the better choice. Conventional zero-down is for people who do not may have access to for VA or USDA.
If I put zero down, can I negotiate a lower price to offset the higher costs?
You can try, but sellers know that zero-down buyers have less negotiating power. In a competitive market, a buyer with 20 percent down is more attractive because they are less likely to walk away or default. In a slow market, you may have more room to negotiate, but the price reduction would need to be substantial to offset the PMI and rate premium.