Loans that require no down payment exist, but they come with real costs
You can borrow the full purchase price of a home without a down payment through VA loans, USDA loans, or certain conventional loans with lender-paid mortgage insurance. The catch is that lenders offset the risk of lending 100 percent of the home's value by charging you higher interest rates, mandatory mortgage insurance premiums, or both. You will pay more over the life of the loan than someone who put money down.
The three main paths are: military service (VA), rural property purchase (USDA), or conventional financing with mortgage insurance built into your rate. Each has different income limits, property requirements, and approval timelines. None of them means you avoid the cost of borrowing without a down payment—they just move that cost into your monthly payment or upfront fees.
Key Takeaways
- VA loans and USDA loans require no down payment and no mortgage insurance, but VA loans are limited to military members and USDA loans only cover rural and some suburban properties.
- Conventional loans with lender-paid mortgage insurance let you borrow 100 percent of the purchase price, but you will pay a higher interest rate for the life of the loan to cover the lender's insurance cost.
- All no-down-payment loans require a credit score in the mid-600s or higher, steady income history, and debt-to-income ratio below 50 percent in most cases.
- VA and USDA loans take 30 to 45 days to close; conventional loans typically close in 30 to 40 days, but the higher rate means you pay thousands more in interest over 30 years.
VA loans: no down payment, no mortgage insurance, military only
A VA loan is backed by the Department of Veterans Affairs and requires zero down payment and zero mortgage insurance. You pay only the interest rate, property taxes, homeowners insurance, and HOA fees if applicable. The lender absorbs the risk because the VA guarantees a portion of the loan if you default.
You must have served on active duty for at least 181 days (or 90 days during wartime), be currently serving, or be a surviving spouse of a service member who died in service or from a service-connected disability. You obtain a Certificate of may be able to access from the VA by submitting a DD Form 214 (discharge papers) or other military records to the VA website or by mail. This certificate proves to the lender that you may have access to.
VA loans have no income cap, no property type restrictions (you can buy a single-family home, condo, or multi-unit property), and no mortgage insurance. The interest rate is typically lower than conventional rates because the VA may provide reduces lender risk. You will pay a one-time VA funding fee (usually 2.3 percent of the loan amount for first-time users, lower for subsequent loans) unless you are exempt due to disability rating. This fee can be rolled into the loan amount, so you do not pay it upfront.
USDA loans: no down payment for rural and some suburban areas
A USDA loan is backed by the U.S. Department of Agriculture and requires no down payment if the property is in an may be able to access rural or suburban area. Like VA loans, USDA loans include no mortgage insurance requirement. The USDA guarantees the loan, so the lender takes less risk and offers a lower rate than a conventional loan.
You must meet income limits based on your county and household size. Most counties cap income at 115 percent of the area median income; some allow up to 150 percent. You can check your property's may be able to access and your income limit on the USDA's property may be able to access map. The property must be a single-family home (not a multi-unit building or investment property) and must meet USDA minimum property standards—no major structural damage, no lead paint hazards, adequate water and septic systems.
Like VA loans, USDA loans charge a one-time may provide fee (usually 1 percent of the loan amount) that rolls into the loan. There is also an annual fee of 0.35 percent of the loan balance, charged monthly as part of your mortgage payment. This annual fee continues for the life of the loan unless you refinance into a conventional loan later.
Conventional loans with lender-paid mortgage insurance
A conventional loan with lender-paid mortgage insurance (LPMI) lets you borrow 100 percent of the purchase price without a down payment. Instead of you paying mortgage insurance premiums each month, the lender pays the insurance cost upfront and passes it to you as a higher interest rate for the entire loan term.
The rate increase is typically 0.5 to 1 percent higher than a conventional loan with 20 percent down. On a $300,000 loan, that difference adds up to $150 to $300 per month, or $54,000 to $108,000 over 30 years. You do not see a separate line item for mortgage insurance on your statement—it is baked into the rate. This means you cannot remove it later by refinancing unless rates drop enough to offset the higher rate you locked in.
Credit score requirements are usually 680 or higher for LPMI loans. Debt-to-income ratio must be 43 percent or lower in most cases (some lenders go to 50 percent). You will need two months of bank statements, recent pay stubs, and a two-year employment history. The approval and closing timeline is 30 to 40 days, the same as any conventional loan.
How credit score and debt-to-income ratio affect your approval
All three loan types require a credit score of at least 620, though most lenders prefer 640 or higher. A score below 640 narrows your lender options and may result in a higher rate. VA and USDA loans are slightly more forgiving of lower scores than conventional loans because the government may provide reduces lender risk.
Your debt-to-income ratio (DTI) is your total monthly debt payments divided by your gross monthly income. Lenders want to see DTI at 43 percent or lower. If you earn $5,000 per month and have $2,000 in existing debt payments (car loan, credit cards, student loans), your DTI is 40 percent. The new mortgage payment will push you over 43 percent, so you would need to pay down existing debt or earn more to may have access to.
VA loans allow DTI up to 41 percent in most cases, though some lenders go to 50 percent if you have strong compensating factors (high credit score, large cash reserves, stable employment). USDA loans cap DTI at 41 percent. Conventional LPMI loans typically max out at 43 percent. If your DTI is too high, you can reduce it by paying off credit cards, paying down car loans, or waiting until your income increases.
What happens at closing: fees and costs you still pay
Even with no down payment, you will pay closing costs: lender fees, title insurance, appraisal, credit report, underwriting, and attorney fees (if required in your state). Closing costs typically run 2 to 5 percent of the loan amount. On a $300,000 home, that is $6,000 to $15,000.
With a VA or USDA loan, you can ask the seller to cover some or all closing costs as part of the purchase negotiation. This is common in buyer-friendly markets. With a conventional LPMI loan, lender policy varies—some allow seller concessions, others do not. Your real estate agent or loan officer can tell you what is negotiable in your market.
You must also pay for a home inspection (usually $300 to $500) and homeowners insurance (varies by location and home value, but typically $1,000 to $2,000 per year). These are not part of closing costs but are required before you close. If you have no savings for these, a no-down-payment loan is not the right choice yet.
Timeline and next steps after approval
Once you are pre-approved for a VA, USDA, or conventional LPMI loan, you can make an offer on a home. The lender will order an appraisal to confirm the home is worth at least the purchase price. If the appraisal comes in low, you will need to renegotiate the price, pay the difference out of pocket, or walk away. This is a real risk with no-down-payment loans because you have no equity cushion.
Underwriting takes 10 to 20 days. The underwriter reviews your income, employment, credit, and assets to confirm you can repay the loan. They may ask for additional documentation: a letter explaining any late payments, proof of income if you are self-employed, or clarification on large deposits in your bank account. Respond quickly to these requests or your closing will be delayed.
Closing happens 30 to 45 days after your offer is accepted. You will sign loan documents, transfer funds for closing costs (if not covered by the seller), and receive the keys. The lender funds the loan and the title transfers to your name.
Frequently Asked Questions
Can I get a no-down-payment loan if I have bad credit?
Most lenders require a credit score of at least 620 for VA and USDA loans, and 640 or higher for conventional LPMI loans. If your score is below 620, you will need to wait and build credit before applying. Pay down credit card balances, make all payments on time for six months, and dispute any errors on your credit report.
What if the home appraises for less than the purchase price?
The lender will only fund up to the appraised value. If you agreed to pay $300,000 but the home appraises at $280,000, you must either renegotiate the price with the seller, pay the $20,000 difference yourself, or cancel the purchase. With no down payment, you have no cushion to absorb this gap.
Can I refinance out of a conventional LPMI loan later to remove the higher rate?
You can refinance into a new loan, but only if rates drop enough to make refinancing worthwhile. If you locked in a rate 0.75 percent higher than the market rate for LPMI, you would need rates to fall at least that much to break even on refinancing costs. Most people refinance when rates drop 0.5 to 1 percent overall, which may not be enough to offset your LPMI premium.
Do I have to use a real estate agent to buy a home with a no-down-payment loan?
No, but an agent is helpful. They know which sellers accept no-down-payment offers in your market, negotiate on your behalf, and handle paperwork. If you buy without an agent, you will negotiate directly with the seller and their agent, who represents the seller's interests, not yours.
What if I lose my job after I close on the loan?
You are responsible for the mortgage payment regardless of employment status. If you cannot pay, the lender can foreclose. With no down payment and no equity, you have nothing to fall back on. Before taking a no-down-payment loan, build an emergency fund of at least three to six months of mortgage payments.