No down payment mortgages exist, but they come with real tradeoffs
You can get a mortgage without putting money down, but lenders will charge you more for it. The most common no-down-payment options are VA loans (for military members and veterans), USDA loans (for rural properties), and conventional loans with PMI (private mortgage insurance). Each has different rules about who qualifies, what property types work, and what you'll pay in interest and fees over the life of the loan.
The catch is simple: lenders see a down payment as your skin in the game. If you don't put money down, they take on more risk if you stop paying or the home loses value. They pass that risk back to you through higher interest rates, mandatory insurance premiums, or both. A no-down-payment mortgage will cost you thousands more than one where you put 20 percent down.
Key Takeaways
- VA loans and USDA loans allow zero down payment for borrowers who meet military or rural property requirements, with no mortgage insurance required.
- Conventional mortgages with no down payment require private mortgage insurance (PMI), which adds 0.5 to 1.5 percent to your monthly payment and cannot be removed until you build equity.
- Your interest rate will be higher on a no-down-payment loan than on one with a down payment, sometimes by 0.25 to 0.75 percent depending on your credit score and the lender.
- Lenders typically require a credit score of 620 or higher for conventional no-down-payment loans, and 580 or higher for FHA loans with 3.5 percent down.
- The total cost of a no-down-payment mortgage over 30 years can be $50,000 to $100,000 more than a mortgage with 20 percent down, depending on the home price and your rate.
VA loans: zero down if you have military service
A VA loan is backed by the Department of Veterans Affairs and requires no down payment if you meet the service requirements. You must have served on active duty for at least 90 consecutive days (or 181 days during peacetime), be a current member of the National Guard or Reserves with at least six years of service, or be a surviving spouse of someone who died in service or from a service-connected disability. The VA does not lend the money itself—a bank or mortgage company does—but the VA guarantees a portion of the loan, which removes the lender's need for a down payment or mortgage insurance.
To use a VA loan, you need a Certificate of may be able to access, which you can request from the VA through its website or by mail. The process takes a few days to a few weeks. Once you have it, you can shop for a lender that offers VA loans. Your interest rate will typically be lower than a conventional no-down-payment loan because the VA may provide reduces the lender's risk. You will pay a VA funding fee (usually 2.3 percent of the loan amount for first-time users), which can be rolled into the loan or paid upfront.
USDA loans: zero down for rural and some suburban properties
A USDA loan is backed by the U.S. Department of Agriculture and allows zero down payment for properties in rural areas and certain suburban zones. The USDA defines may be able to access areas by county and census tract; you can check whether a specific address qualifies on the USDA's website. The loan is designed to help people buy homes in areas where traditional lending is thin. Like VA loans, USDA loans do not require a down payment or traditional mortgage insurance, but they do require a USDA may provide fee (usually 1 percent of the loan amount, paid upfront or rolled into the loan) and an annual annual mortgage insurance premium (typically 0.35 percent of the loan balance per year).
USDA loans have income limits that vary by county. Your household income must fall below 115 percent of the area median income for the county where the property is located. If you are in a county with higher median income, the threshold is higher in absolute dollars. You also must be a U.S. citizen or permanent resident and have a credit score of at least 580, though most lenders prefer 620 or higher. The application process is similar to a conventional mortgage: you provide tax returns, pay stubs, bank statements, and employment history.
Conventional mortgages with PMI: the most common no-down option
If you do not may have access to for a VA or USDA loan, a conventional mortgage with private mortgage insurance (PMI) is the most widely available no-down-payment option. You borrow 100 percent of the home price, and the lender requires you to buy PMI to protect themselves if you default. PMI typically costs 0.5 to 1.5 percent of the loan amount per year, added to your monthly payment. On a $300,000 loan, that is $1,500 to $4,500 per year, or $125 to $375 per month.
PMI stays on your loan until you have paid down the principal to 80 percent of the original home value or until you refinance. If the home appreciates, you can reach 80 percent equity faster. If it does not, you could be paying PMI for years. Your interest rate on a no-down conventional loan will also be higher than on a loan with a down payment—typically 0.25 to 0.75 percent higher, depending on your credit score and the lender. You will need a credit score of at least 620, though most lenders prefer 640 or higher for the best rates.
FHA loans: 3.5 percent down as an alternative
If you cannot save for a down payment but want to avoid the full cost of PMI on a conventional loan, an FHA loan may be cheaper. FHA loans require only 3.5 percent down and are backed by the Federal Housing Administration. They allow lower credit scores (580 and up) and are easier to may have access to for than conventional loans. However, FHA loans require both an upfront mortgage insurance premium (1.75 percent of the loan amount, usually rolled into the loan) and an annual mortgage insurance premium (0.55 to 0.8 percent per year, depending on the loan-to-value ratio). The annual insurance stays on the loan for the full 30 years if you put down less than 10 percent.
For a $300,000 home with 3.5 percent down ($10,500), you would borrow $289,500. The upfront insurance premium of $5,066 gets added to the loan, making it $294,566. Then you pay annual insurance on top of that. Over 30 years, the total insurance cost can exceed $80,000. Compare this to a conventional loan with PMI: you might pay less in total insurance if you can reach 80 percent equity within five to ten years.
What the real cost looks like: comparing your options
The difference between a no-down-payment mortgage and one with 20 percent down is substantial. On a $300,000 home:
| Loan Type | Down Payment | Interest Rate (example) | Monthly Payment (P&I only) | Insurance/may provide Cost | Total Monthly (P&I + Insurance) |
|---|---|---|---|---|---|
| Conventional, 20% down | $60,000 | 6.5% | $1,520 | $0 | $1,520 |
| Conventional, 0% down + PMI | $0 | 7.0% | $1,996 | $250 | $2,246 |
| FHA, 3.5% down | $10,500 | 6.8% | $1,835 | $280 | $2,115 |
| VA, 0% down | $0 | 6.3% | $1,703 | $0 (after funding fee) | $1,703 |
These are example rates and will vary by lender, credit score, and market conditions. The point is clear: a no-down-payment conventional loan costs $726 more per month than a 20-percent-down loan on the same home. Over 30 years, that is $261,360 in additional cost. A VA loan, by contrast, costs only $183 more per month because there is no PMI and the rate is lower.
How to decide which path makes sense for you
Start by checking whether you may have access to for VA or USDA loans. If you do, those are almost always cheaper than conventional no-down-payment loans because they eliminate PMI. A VA loan is the strongest option if you have the service record; a USDA loan is worth exploring if your property is in an may be able to access rural or suburban area and your income is below the limit.
If neither applies, decide whether you can save for a down payment. Even 5 to 10 percent down will lower your interest rate and reduce or eliminate PMI. If you cannot wait, a conventional loan with PMI is more flexible than FHA (you can remove PMI once you reach 80 percent equity), but it costs more upfront. An FHA loan makes sense only if your credit score is too low for conventional lending or if you plan to stay in the home long enough for the lower down payment to offset the 30-year insurance cost.
Talk to multiple lenders before deciding. Interest rates and PMI costs vary, and a lender offering a 0.5 percent lower rate can save you tens of thousands of dollars over the life of the loan. Ask each lender for a Loan Estimate, which shows the interest rate, all fees, and the total cost of the loan. Compare them side by side.
Frequently Asked Questions
Can I remove PMI once I build equity?
Yes, on a conventional loan. Once you reach 80 percent of the original home value in equity, you can request PMI removal. This happens through principal paydown, home appreciation, or a combination of both. FHA loans are different: if you put down less than 10 percent, the mortgage insurance stays for the full 30 years and cannot be removed.
What credit score do I need for a no-down-payment mortgage?
Conventional loans typically require 620 or higher, though 640 or higher gets better rates. FHA loans allow 580 or higher. VA and USDA loans have no official minimum credit score, but most lenders require 580 to 620. A higher score will lower your interest rate by 0.25 to 0.75 percent.
Can I use a gift for the down payment instead of my own savings?
Yes, but lenders have rules about it. On a conventional loan, a gift from a family member can count toward your down payment, but you must provide a signed gift letter stating the money is a gift, not a loan. The gift giver cannot expect repayment. VA and USDA loans also allow gifts. FHA loans allow gifts as well, though the rules vary slightly by lender.
What happens if the home value drops after I buy it?
If you have no down payment and the home loses value, you could end up underwater (owing more than the home is worth). This makes it harder to refinance or sell. PMI protects the lender, not you, so you would still owe the full loan amount. This is why a down payment, even a small one, protects your own financial position.
Is it better to wait and save for a down payment, or buy now with no money down?
That depends on your local market and how long you plan to stay. If home prices are rising faster than you can save, buying now with no down payment and paying PMI might be cheaper than waiting. If prices are stable or falling, waiting to save 10 to 20 percent down will save you money in the long run. Run the numbers with a lender for your specific situation.