Yes, but only through specific loan programs, and they come with real tradeoffs
You can buy a house with zero down payment, but not through a conventional mortgage. The main routes are VA loans (for military members and veterans), USDA loans (for rural properties), and FHA loans with down payment assistance (for first-time buyers in some states). Each has different rules about property type, location, income, and credit score. None of them are assistance programs — you still pay interest, closing costs, and mortgage insurance.
The catch is that lenders offset the risk of no down payment by charging higher interest rates, requiring mortgage insurance, or restricting where you can buy. A zero-down loan costs more over time than one where you put money down. Lenders also scrutinize your income and credit more closely when you have no skin in the game.
Key Takeaways
- VA loans and USDA loans allow zero down payment for borrowers who meet military service or rural property requirements, with no mortgage insurance required on VA loans.
- FHA loans require 3.5% down, but some state and local programs cover that down payment for first-time buyers, making the out-of-pocket cost zero.
- Zero-down loans charge higher interest rates and mortgage insurance premiums than conventional loans with 20% down, adding thousands to your total cost.
- Lenders require stronger credit scores and income verification for zero-down loans because they have no down payment to absorb losses if you default.
- The property type and location matter: VA and USDA loans have restrictions on what kinds of homes and neighborhoods may have access to.
VA loans: zero down for military and veterans
A VA loan is may provide by the Department of Veterans Affairs and requires no down payment if you have a Certificate of may be able to access. You must be an active-duty service member, veteran, or surviving spouse of someone who died in service or from a service-related injury. The VA does not lend the money itself — a bank or mortgage lender does — but the VA guarantees a portion of the loan, which removes the lender's need for a down payment.
VA loans have no mortgage insurance requirement, which saves you hundreds of dollars per month compared to FHA or conventional loans. You do pay a one-time VA funding fee (usually 2.3% of the loan amount for first-time users), which can be rolled into the loan. The interest rate is typically lower than FHA or conventional loans at the same credit score.
The trade-off is that the property must be your primary residence, and the lender will order a VA appraisal to confirm the home is worth what you are paying. If the appraisal comes in low, you either renegotiate the price or walk away — the VA will not may provide a loan for more than the appraised value. You also cannot use a VA loan to buy an investment property or a second home.
USDA loans: zero down for rural and suburban properties
A USDA loan is backed by the U.S. Department of Agriculture and requires zero down payment if the property is in a rural or may be able to access suburban area. The USDA defines "rural" broadly — it includes many towns and outer suburbs, not just farms. You can check whether a specific address qualifies on the USDA website by entering the zip code or street address.
Like VA loans, USDA loans have no mortgage insurance, though you do pay a one-time may provide fee (around 1% of the loan amount) rolled into the loan. The interest rate is competitive with VA loans. Income limits apply: you cannot earn more than 115% of the median income for your county, though this threshold varies widely by location.
The main restriction is location. If the property is in an urban or densely populated area, it does not may have access to, even if it is technically within a city boundary. The USDA also requires the home to meet minimum property standards — it cannot have major structural damage, hazardous materials, or code violations. If the inspection finds problems, the seller must fix them before closing or you can walk away.
FHA loans with down payment assistance programs
An FHA loan requires a minimum 3.5% down payment, but several states and cities offer down payment assistance programs that cover this amount for first-time buyers. The assistance is usually a grant (money you do not repay) or a forgivable loan (you repay it only if you sell the house within a set period, often 5 to 10 years). Combined, they make your out-of-pocket cost zero.
The catch is that FHA loans require mortgage insurance for the life of the loan if you put down less than 10%. This insurance costs 0.55% to 0.8% of the loan amount annually, added to your monthly payment. On a $300,000 loan, that is $165 to $240 per month. You cannot remove it even after you build equity, unlike conventional loans where mortgage insurance drops off at 20% equity.
Down payment assistance programs vary by state and change year to year. Some are run by state housing finance agencies, others by nonprofits or local governments. To find what is available in your area, contact your state housing finance agency or search "down payment assistance [your state]." Many programs have income limits, credit score minimums (usually 620 or higher), and require you to complete a homebuyer education course.
How zero-down loans affect your monthly payment and total cost
A zero-down loan costs more over the life of the mortgage than putting money down. Here is why: lenders charge a higher interest rate to offset the risk, and most zero-down loans require mortgage insurance. On a $300,000 home, the difference between a 6% conventional loan with 20% down and a 6.5% FHA loan with 3.5% down is roughly $150 to $200 per month, plus the mortgage insurance premium.
Over 30 years, that extra $150 to $200 per month adds up to $54,000 to $72,000 in additional interest and insurance. If you can save even 5% to 10% for a down payment, the long-term savings are substantial. However, if you cannot save that amount and renting is not an option, a zero-down loan still lets you build equity instead of paying rent to a landlord.
The interest rate you receive also depends on your credit score. Borrowers with scores below 640 may not may have access to for zero-down loans at all, or will pay rates 1% to 2% higher than borrowers with scores above 740. If your credit is weak, improving it before applying can save tens of thousands in interest.
Credit score and income requirements for zero-down loans
Lenders are stricter about credit and income when there is no down payment because they have no buffer if you default. Most VA and USDA lenders require a credit score of at least 620, though 640 or higher improves your rate. FHA loans allow scores as low as 580, but rates are higher and some lenders have their own minimums above 600.
Income verification is also more rigorous. Lenders will ask for two years of tax returns, recent pay stubs, and bank statements. If you are self-employed, you may need to provide profit-and-loss statements and accountant letters. The lender calculates your debt-to-income ratio — the total of all monthly debt payments divided by gross monthly income — and most zero-down programs require this to be 43% or lower. Some allow up to 50% if you have strong compensating factors like a large savings account or low credit card balances.
If you have recent late payments, collections, or a bankruptcy, zero-down loans are harder to get. VA loans typically require a two-year waiting period after a bankruptcy discharge. FHA loans allow bankruptcy after three years. USDA loans have no set waiting period but require a written explanation of what happened and proof that you have recovered financially.
What to do if zero-down loans do not work for you
If your credit is too low or your debt-to-income ratio is too high, you have a few options. First, delay buying for 6 to 12 months while you pay down debt and improve your credit score. Even a 20-point increase in your score can lower your interest rate by 0.25% to 0.5%, saving thousands over the loan term.
Second, ask family members whether they can gift you a down payment. Most lenders allow down payment gifts from relatives, though they require a signed letter stating the money is a gift and does not need to be repaid. The gift cannot come from the seller or anyone with a financial interest in the sale.
Third, look into first-time buyer programs specific to your state or city. Some offer forgivable loans, grants, or tax credits that reduce the amount you need to save. These programs often have less stringent credit requirements than traditional lenders, though they may have income limits or require you to buy in a specific neighborhood.
Frequently Asked Questions
Can I use a VA loan or USDA loan if I have bad credit?
Both programs have minimum credit score requirements, usually 620 or higher, though some lenders go lower. If your score is below 620, you may not may have access to. If it is between 620 and 640, you can apply but will pay a higher interest rate. Improving your score before applying is worth the wait.
What happens if the home appraisal comes in lower than the purchase price?
On a VA loan, the lender will not may provide more than the appraised value, so you must renegotiate the price down or pay the difference out of pocket. On a USDA loan, the same rule applies. On an FHA loan, you can renegotiate or walk away. The seller cannot force you to pay more than the home is worth.
Can I use a zero-down loan to buy a second home or investment property?
No. VA loans, USDA loans, and FHA loans all require the property to be your primary residence — the place where you live most of the year. You cannot use them for vacation homes, rental properties, or investment purchases.
Do I have to pay back the down payment assistance grant?
Grants do not need to be repaid. Forgivable loans do not need to be repaid if you stay in the home for the required period (usually 5 to 10 years). If you sell before that time, you may owe back part or all of the assistance. Read the program terms carefully before accepting.
What is the difference between a VA funding fee and mortgage insurance?
The VA funding fee is a one-time charge paid to the VA to offset the cost of the may provide program. Mortgage insurance is an ongoing monthly payment to protect the lender if you default. VA loans have a funding fee but no mortgage insurance. FHA and USDA loans have neither a funding fee nor mortgage insurance on USDA loans, but FHA loans require mortgage insurance for the life of the loan.