What it takes to buy without a down payment
You can buy a home without a down payment through specific loan programs that exist for this purpose, but you will pay more in interest and fees over the life of the loan, and your options are narrower than they are for buyers with down payments. The main routes are VA loans (for military members and veterans), USDA loans (for rural properties), and conventional 100% financing (rare and expensive). Each has different income limits, property requirements, and credit score minimums.
Lenders do not give away down payment coverage out of goodwill. When you put down zero dollars, the lender takes on more risk if the home value drops or you stop paying. They offset that risk by charging a higher interest rate, requiring mortgage insurance (PMI for conventional loans, funding fees for VA and USDA loans), and being stricter about your credit history and debt-to-income ratio. You will also need to show stable income, typically two years of tax returns, and a clean payment history.
Key Takeaways
- VA loans and USDA loans are the most common zero-down paths; conventional 100% financing exists but carries higher rates and stricter requirements.
- You will pay mortgage insurance or a funding fee on top of your monthly payment, adding hundreds of dollars per month to your cost.
- Lenders will scrutinize your credit score, debt-to-income ratio, and employment history more closely when you have no down payment to absorb risk.
- The property itself must meet the lender's standards—VA and USDA loans have appraisal and condition requirements that conventional loans may not.
- Pre-approval takes longer without a down payment because lenders verify income and assets more thoroughly.
VA loans: the zero-down option for military and veterans
If you served on active duty, are currently serving, or are a surviving spouse of a service member, you may be may have access to to a VA loan through the Department of Veterans Affairs. VA loans require zero down payment and do not require PMI. Instead, you pay a one-time funding fee (usually 2.3% of the loan amount for first-time users, lower if you have a disability rating) that can be rolled into your loan balance.
To use a VA loan, you need a Certificate of may be able to access from the VA, which you can request online through VA.gov or through your lender. The VA does not set a maximum loan amount, but individual lenders do. Your debt-to-income ratio typically cannot exceed 41%, though some lenders will go higher if you have strong compensating factors like savings or a low credit utilization ratio. Credit score requirements vary by lender but usually start at 580–620.
VA loans come with a built-in appraisal requirement called the VA appraisal, which is stricter than a standard appraisal. The property must meet minimum safety and livability standards—no major structural damage, working plumbing and electrical, no lead paint hazards in homes built before 1978. If the appraisal comes back below the purchase price, the VA will not allow the sale to proceed at that price unless you cover the difference in cash.
USDA loans: zero-down rural mortgages
The USDA Rural Development Loan Program offers zero-down financing for homes in designated rural areas. You do not need to be a farmer or work in agriculture; you just need to buy in an may be able to access area. The USDA maintains a map of may be able to access counties and census tracts on its website. Most suburban and urban areas do not may have access to, but many small towns and exurban properties do.
Like VA loans, USDA loans require a may provide fee (usually 1% of the loan amount, rolled into the balance) and an annual fee (0.35% of the loan balance, added to your monthly payment). You must meet income limits that vary by county and family size—generally, your household income cannot exceed 115% of the area median income. Your debt-to-income ratio cannot exceed 43%, and your credit score typically needs to be at least 580, though 640 or higher improves your chances.
USDA appraisals are also strict. The property must be a single-family home (not a condo or multi-unit building), in reasonable condition, and meet minimum safety standards. Like VA loans, if the appraisal comes in below the purchase price, you must cover the gap in cash or renegotiate the price.
Conventional 100% financing: expensive and hard to find
Some conventional lenders offer mortgages that cover 100% of the purchase price, but these are uncommon and come with steep costs. Your interest rate will be 0.5% to 1% higher than a comparable 20% down payment loan. You will pay PMI (private mortgage insurance) at rates between 0.5% and 1.5% of the loan amount annually, added to your monthly payment. You may also pay an origination fee of 1% to 2% of the loan amount.
Lenders offering conventional 100% financing typically require a credit score of 700 or higher, a debt-to-income ratio below 36%, and two years of stable employment history. Some require a larger cash reserve (three to six months of mortgage payments) to show you can weather a financial emergency. Appraisals are standard, not stricter, but the property still must appraise at or above the purchase price.
Because these loans are rare, you may need to shop multiple lenders or work with a mortgage broker who has relationships with portfolio lenders (lenders who keep loans in-house rather than selling them). The application and approval process often takes longer.
How mortgage insurance and funding fees change your monthly cost
When you put down zero dollars, the lender's insurance cost gets passed to you. Here is how it works in practice:
| Loan Type | Insurance/Fee | How It's Paid | Approximate Monthly Impact on $300,000 Loan |
|---|---|---|---|
| VA Loan | 2.3% funding fee (first-time) | Rolled into loan balance | $20–25 added to payment |
| USDA Loan | 1% may provide fee + 0.35% annual fee | Rolled in + added monthly | $90–120 added to payment |
| Conventional 100% | 0.5–1.5% PMI annually | Added to monthly payment | $125–375 added to payment |
These amounts are in addition to your base mortgage payment (principal and interest), property taxes, homeowners insurance, and HOA fees if applicable. On a $300,000 loan at 7% interest over 30 years, your base payment is roughly $1,995. Add insurance or fees, and you are paying $2,100 to $2,370 per month—hundreds more than a buyer with a 20% down payment would pay.
PMI on conventional loans can sometimes be removed once you reach 20% equity in the home (through a combination of payments and appreciation), but this takes years. VA and USDA funding fees are permanent and cannot be removed.
Credit score, income, and debt requirements without a down payment
Lenders are stricter about credit and income when you have no down payment because you have no skin in the game—if you walk away, they lose money immediately. Expect these minimums:
- Credit score: VA loans typically start at 580–620; USDA at 580; conventional at 700+. Scores above 740 get better rates across all programs.
- Debt-to-income ratio: VA loans allow up to 41% (sometimes higher); USDA up to 43%; conventional up to 36–43% depending on the lender. This ratio includes your new mortgage payment plus all other monthly debts (car loans, student loans, credit cards, child support).
- Employment history: Most lenders want two years at the same job or in the same field. Self-employed borrowers need two years of tax returns and may face additional scrutiny.
- Cash reserves: Conventional lenders often require three to six months of mortgage payments in savings. VA and USDA lenders are more flexible but still prefer to see some reserves.
Lenders will also pull your full credit report and may ask about late payments, collections, or charge-offs. Recent negative marks (within the last two years) make approval harder. If you have a bankruptcy or foreclosure, you typically need to wait two to three years after discharge before most lenders will consider you.
The appraisal problem: what happens if the home is worth less than the price
With a down payment, you have a cushion. If you buy a $300,000 home with 20% down and it appraises at $290,000, you absorb the loss. With zero down, there is no cushion. If the appraisal comes in below the purchase price, the lender will not fund the loan at that price because they would be lending more than the home is worth.
Your options then are: renegotiate the price down with the seller, pay the difference in cash out of pocket, or walk away and lose your inspection fee and appraisal fee (typically $500–$1,000 combined). In a hot market, sellers often refuse to renegotiate. In a cooling market, low appraisals are common.
This is one reason having some cash reserves—even if not a full down payment—protects you. If you can cover a $10,000 appraisal gap, you have options. If you cannot, you are stuck.
Frequently Asked Questions
Can I use a gift or loan from family to cover a down payment if I am using a VA or USDA loan?
No. VA and USDA loans explicitly prohibit using borrowed money for a down payment. A gift from a family member is allowed, but it cannot be a loan you have to repay. If you use a gift, the lender will ask for a signed letter from the family member stating it is a gift with no repayment expected.
What if I have bad credit but want a zero-down loan?
VA and USDA loans are more forgiving of past credit problems than conventional loans, but you still need a minimum score (usually 580–620). If your score is below that, work on paying down existing debts and making on-time payments for six to twelve months before applying. A credit counselor can help you understand what is hurting your score.
Do I have to use a VA or USDA loan if I am may be able to access?
No. You can choose a conventional loan instead if you prefer, though it will likely cost more without a down payment. Some borrowers with VA may be able to access use a conventional loan to avoid the VA appraisal requirements or to buy in an area where VA loans are less common. Compare offers from multiple lenders before deciding.
Can I remove PMI from a conventional zero-down loan?
PMI can be removed once you reach 20% equity through a combination of payments and home appreciation, but this typically takes seven to ten years. Some lenders allow you to request PMI removal at 20% equity; others require you to refinance. Check your loan documents for the specific terms.
What happens if I lose my job after I close on a zero-down loan?
Your lender does not care why you cannot pay—only that you pay. If you lose your job and cannot make the mortgage payment, you risk foreclosure. This is why lenders want to see cash reserves and stable employment history. If you are worried about job stability, having even a small down payment (3–5%) gives you more breathing room.