What zero-down mortgages actually are and who offers them

A zero-down mortgage lets you borrow the full purchase price of a home without saving a down payment first. The lender covers 100% of the cost, and you begin repaying immediately. These loans exist, but they are not common, and the terms depend heavily on your credit score, income, and the type of loan you pursue.

Three main paths exist: VA loans (for military members and veterans), USDA loans (for rural properties), and conventional loans with lender-paid mortgage insurance. Each has different rules about who qualifies and what the actual cost to you will be over time.

Banks and mortgage lenders do offer these products because they can shift the risk to insurance companies or government guarantees. That does not mean the loan is cheaper—it means the cost is hidden in your monthly payment rather than collected upfront.

Key Takeaways

  • VA loans and USDA loans are the most straightforward zero-down options, but VA loans require military service and USDA loans require a property in an may be able to access rural area.
  • Conventional zero-down loans exist but come with mortgage insurance built into your monthly payment, raising your total cost significantly over 15 or 30 years.
  • Your credit score, debt-to-income ratio, and employment history matter more without a down payment, because the lender has no equity cushion if you default.
  • Closing costs (typically 2% to 5% of the purchase price) still come out of your pocket or must be negotiated into the loan, even with zero down.
  • The monthly payment on a zero-down loan is higher than on the same loan with 20% down, because you are borrowing more and carrying insurance.

VA loans: the most accessible zero-down option for veterans

If you served in the military, a VA loan is usually the cheapest way to buy a home with no down payment. The Department of Veterans Affairs guarantees a portion of the loan to the lender, which removes the lender's risk and eliminates the 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 request from the VA directly through their website or by mail. The process takes a few days to a few weeks. Once you have it, you can take it to any lender that offers VA loans—most banks and mortgage companies do.

VA loans have no prepayment penalty, no mortgage insurance, and typically lower interest rates than conventional loans. The only required cost is a one-time VA funding fee (usually 1% to 3.3% of the loan amount), which you can roll into the loan itself rather than pay upfront. If you are a surviving spouse of a veteran or have a service-connected disability, you may not owe the funding fee at all.

USDA loans for rural and suburban properties

The USDA Rural Development loan program offers zero-down financing for homes in may be able to access rural and suburban areas. The USDA guarantees the loan, similar to how the VA does, which means no down payment and no mortgage insurance required.

The catch is location: your property must be in a designated rural area. The USDA maintains a map on its website where you can enter an address and see if it qualifies. Many suburban areas on the edge of cities do may have access to, but dense urban neighborhoods do not.

Income limits apply—your household income cannot exceed 115% of the median income for your county. The USDA also requires that you have a reasonable credit history and stable income, but the bar is lower than for conventional loans. Like VA loans, USDA loans have no prepayment penalty and no mortgage insurance, though there is a one-time may provide fee (about 1% of the loan) that you can roll into the loan.

Conventional zero-down loans and the cost of mortgage insurance

If you do not may have access to for VA or USDA loans, some conventional lenders will finance 100% of a home's purchase price. The trade-off is mortgage insurance, which protects the lender if you stop paying.

Mortgage insurance on a conventional loan costs between 0.5% and 1.5% of your loan amount per year, depending on your credit score and how much you are borrowing. On a $300,000 loan, that could be $1,500 to $4,500 per year added to your monthly payment. This insurance does not build equity for you—it only protects the lender.

You can remove mortgage insurance once you reach 20% equity in the home, but that takes years of payments. Some lenders allow you to remove it after five to seven years if your home has appreciated and you refinance. Others require you to wait until you have paid down the principal to 80% of the original purchase price.

Credit score and debt requirements without a down payment

Lenders tighten their standards when you have no down payment, because they have no equity cushion if the home loses value or you default. Most require a credit score of at least 620 for conventional loans, though 640 to 660 is more realistic for approval. VA and USDA loans are more flexible—some lenders will work with scores in the 580 to 600 range, though rates will be higher.

Your debt-to-income ratio (the percentage of your gross monthly income that goes to debt payments) also matters more. Lenders typically want this ratio below 43% to 50%, depending on the loan type. Without a down payment to show you have savings discipline, they rely more heavily on your income stability and payment history.

Expect to provide recent pay stubs, tax returns for the past two years, bank statements, and a detailed employment history. If you have changed jobs recently, the lender will want to see that your new income is stable and comparable to your previous earnings.

Closing costs you still have to cover

Even with zero down, you will owe closing costs—the fees for processing the loan, title search, appraisal, and insurance. These typically run 2% to 5% of the purchase price. On a $300,000 home, that is $6,000 to $15,000.

You have three options: pay them out of pocket, negotiate the seller to cover them (common in a buyer's market), or roll them into the loan itself. Rolling them in means you borrow more money and pay interest on the closing costs over 15 or 30 years, which increases your total cost significantly.

Some lenders offer "no-closing-cost" loans, but this is misleading—the costs are not waived, they are built into a higher interest rate. You will pay more in interest over the life of the loan than you would have paid in upfront closing costs.

How your monthly payment compares to a loan with 20% down

On a $300,000 home, a conventional 30-year loan at 7% interest with 20% down ($60,000) costs about $1,260 per month in principal and interest. The same loan with zero down costs about $1,995 per month—$735 more—because you are borrowing an extra $60,000. Add mortgage insurance (roughly $200 to $400 per month), and you are paying $2,195 to $2,395 per month instead of $1,260.

Over 30 years, that difference adds up to more than $300,000 in extra payments. A VA or USDA loan eliminates the mortgage insurance, so the payment stays closer to $1,995, but you are still borrowing more than if you had a down payment.

This is why zero-down loans make sense only if you cannot save a down payment and the alternative is renting indefinitely, or if you are using a VA or USDA loan where the terms are genuinely competitive with conventional loans that require money down.

Frequently Asked Questions

Can I get a zero-down loan if I have bad credit?

VA and USDA loans are more forgiving than conventional loans, and some lenders will work with credit scores as low as 580 to 600. Conventional zero-down loans typically require 620 or higher. If your score is below 620, focus on VA or USDA loans if you are may be able to access, or spend three to six months paying down debt and making on-time payments to raise your score before applying.

What happens if the home loses value after I buy it?

You are responsible for the full loan amount regardless of the home's value. If you owe $300,000 and the home is worth $250,000, you still owe $300,000. This is called being underwater. With a down payment, you have equity to cushion against value drops. Without one, you are immediately at risk if the market declines.

Can I use a gift for a down payment instead of a zero-down loan?

Yes, and it may be cheaper than a zero-down loan. A gift of $20,000 to $30,000 from a family member can lower your loan amount, reduce your monthly payment, and eliminate mortgage insurance. Most lenders require a letter from the gift-giver stating it is a gift, not a loan you have to repay.

Do I have to use the same lender for a VA or USDA loan?

No. Your Certificate of may be able to access (for VA loans) or USDA pre-approval works with any lender that offers these products. Shop around—interest rates and fees vary significantly between lenders, and a difference of 0.5% in interest rate saves tens of thousands over 30 years.

What if I want to pay down the mortgage insurance faster?

You can make extra principal payments to reach 20% equity sooner, which allows you to remove mortgage insurance. Some lenders let you remove it after five to seven years if your home has appreciated. Ask your lender about their specific policy before you sign—rules vary widely.