There are a few alternatives to a conventional mortgage in which you can buy a house with no money down.
Maskot/Getty Images
Most mortgages require you to make a down payment, but there are a couple of options that don’t.
VA loans and USDA loans are government-backed mortgages that allow 0% down payments.
If you don’t qualify for a zero down option, you may still be able to put as little as 3% down.
Coming up with the cash for a down payment can be a big hurdle for anyone hoping to become a homeowner.
Some conforming mortgages allow borrowers to put down just 3%, while FHA borrowers can make a minimum down payment of 3.5%. These lower amounts can make homeownership more feasible for some, but this can still be a significant hurdle.
For those who are eligible, no money down mortgage loans offer a way for those on tighter budgets to get into a home without having to spend years saving up.
Can you get a mortgage without a down payment?
Yes, it’s possible to get a mortgage with no down payment. But you have to be eligible for at least one of the two major types of mortgages that offer this option: VA loans and USDA loans.
If you don’t qualify for one of these loans, there are other strategies you can use to come up with a down payment, such as seeing if you qualify for any down payment assistance programs offered by local nonprofits or your city or state housing agency. Some borrowers also receive assistance in the form of a gift from their loved ones.
Keep in mind that, even if you get a zero-down mortgage, you’ll still likely need to pay closing costs, which can equal between 3% and 6% of the loan amount. You’ll typically owe this amount at closing.
No down payment mortgage options
Both VA loans and USDA loans are only available to borrowers who meet certain criteria.
VA loans
VA loans are guaranteed by the US Department of Veterans Affairs. These mortgages are available only to current and former service members who meet minimum service requirements. VA mortgage borrowers enjoy the ability to put no money down and interest rates that are typically lower than conventional mortgage rates.
If you take out a VA loan, you will have to pay a funding fee, which protects the lender in case of default. If you’re putting 0% down and it’s your first time getting a VA loan, your funding fee will be equal to 2.3% of the loan amount. This fee can be financed into your loan or you can pay it at closing.
USDA loans
USDA loans are guaranteed by the US Department of Agriculture. These loans are only available to borrowers in eligible rural or suburban areas who meet income limits. You can use the USDA’s eligibility map to see if the area you’re buying your house in is eligible. The site also has a tool for determining if your income qualifies you for one of these mortgages.
Like VA mortgages, USDA mortgages allow no down payment but charge borrowers an upfront fee. The USDA loan fee is known as a guarantee fee and is equal to 1% of the loan amount. You’ll pay a yearly fee equal to 0.35% of the loan amount as well.
Low down payment mortgage options
If you don’t qualify for a zero-down mortgage, look for lenders that offer mortgages with low minimum down payment requirements.
FHA loans
FHA loans are backed by the Federal Housing Administration. They allow down payments as low as 3.5% and have less stringent credit requirements, making them a good option for first-time homebuyers or those with rocky credit histories.
These mortgages come with both an upfront mortgage insurance premium of 1.75%, as well as an annual premium that equals between 0.45% and 1.05% of your loan amount.
Conforming loans
Mortgages that conform to Federal Housing Finance Agency loan limits and the standards set by Fannie Mae and Freddie Mac are known as conforming loans. With one of these mortgages, it’s possible to buy a home with just 3% down.
To qualify, you may need to be a first-time homebuyer or meet income limits for your area. Conforming loans also require a credit score of at least 620.