You can buy a house with zero down through specific loan programs, but you will pay more in interest and insurance over time

Three real paths exist to buy without a down payment: 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, where the property must be, and what the lender requires in return. None of them are hidden or rare—they are standard products that banks and mortgage companies advertise openly. The tradeoff is always the same: you avoid saving a down payment, but you pay higher monthly costs because the lender takes on more risk.

The monthly payment difference is substantial. On a $300,000 home with a 7 percent interest rate over 30 years, a 20-percent-down loan costs about $1,596 per month. A zero-down loan costs about $1,995 per month—nearly $400 more before mortgage insurance. Which path you choose depends on your military status, where the property is located, and how long you plan to stay in the home.

Key Takeaways

  • VA loans require military service or veteran status and allow 100 percent financing on properties up to the VA loan limit in your county.
  • USDA loans require the property to be in a designated rural area and the borrower to meet income limits, typically 115 percent of the area median income.
  • Conventional zero-down loans exist but come with mortgage insurance premiums that add hundreds to your monthly payment.
  • All three paths require proof of income, a credit score (usually 620 or higher), and a debt-to-income ratio the lender will accept.
  • The property itself must meet the lender's standards—a home inspection and appraisal are required before closing, and you cannot borrow more than the home is worth.

VA loans: the zero-down option for military and veterans

If you served on active duty, in the National Guard, or in the Reserves, you may hold a Certificate of may be able to access that lets you borrow the full purchase price with no down payment. The Department of Veterans Affairs does not lend the money itself—instead, it guarantees a portion of the loan to a bank or mortgage company, which removes the lender's incentive to require a down payment. The may provide covers up to the county loan limit (which varies by location and changes yearly) or 25 percent of the purchase price, whichever is higher.

To use a VA loan, you must obtain your Certificate of may be able to access from the VA. You can request it online through VA.gov, by mail, or through your lender (many will request it on your behalf). The certificate shows your service dates and discharge status. You will also pay a VA funding fee at closing—this is a one-time charge that ranges from 1.4 to 3.6 percent of the loan amount, depending on your down payment (zero down means the highest fee) and whether you are a first-time VA borrower. The fee can be rolled into the loan, so you do not need cash at closing, but it increases what you owe.

VA loans have no prepayment penalty, no mortgage insurance requirement, and no maximum loan amount at the federal level (though individual lenders set their own caps). The interest rate is typically lower than conventional loans because the VA may provide reduces the lender's risk. You still need a credit score (usually 620 or higher, though some lenders require 640), proof of income, and a debt-to-income ratio under 41 percent in most cases.

USDA loans: zero-down financing for rural properties

The USDA Rural Development Loan Program finances homes in designated rural areas with no down payment required. The USDA does not lend directly to most borrowers—instead, it guarantees loans made by approved lenders. To may have access to, the property must be in a rural area as defined by USDA maps (you can check your address on the USDA website), and your household income must not exceed 115 percent of the area median income (some programs allow up to 150 percent for very rural areas).

Like VA loans, USDA loans come with a may provide fee paid at closing. The upfront may provide fee is 1 percent of the loan amount and is typically rolled into the loan. You also pay an annual mortgage insurance premium (0.55 percent of the loan balance per year for most borrowers) for the life of the loan, added to your monthly payment. This insurance is mandatory and does not disappear once you reach 20 percent equity, unlike conventional mortgage insurance.

USDA loans require a credit score of 580 or higher (though 640 is more common for approval), proof of income, and a debt-to-income ratio under 41 to 43 percent depending on the lender. The property must be a single-family home and meet USDA property standards—manufactured homes are allowed if they meet specific requirements, but investment properties and multi-unit buildings are not. You cannot use a USDA loan to buy a home in an area the USDA classifies as urban or suburban.

Conventional loans with lender-paid mortgage insurance

Banks and mortgage companies offer conventional loans with zero down payment, but the cost is higher than VA or USDA loans. When you put down less than 20 percent, the lender requires private mortgage insurance (PMI) to protect itself if you default. With a zero-down conventional loan, PMI is substantial—typically 1 to 2 percent of the loan amount per year, added to your monthly payment. On a $300,000 loan, that is $3,000 to $6,000 per year, or $250 to $500 per month.

Some lenders offer lender-paid mortgage insurance (LPMI), where the lender pays the insurance premium upfront and recoups the cost by charging you a higher interest rate. This can lower your monthly payment compared to borrower-paid PMI, but you pay more interest over the life of the loan. The tradeoff is worth calculating with your lender before you commit.

Conventional zero-down loans require a credit score of 620 or higher (often 640 or 660 in practice), proof of income, and a debt-to-income ratio under 43 percent. The property can be anywhere—there are no geographic restrictions like USDA loans. However, the lender will appraise the home and will not lend more than it is worth. If the home appraises below the purchase price, you will need to renegotiate the price, make up the difference in cash, or walk away.

What lenders require before closing, regardless of down payment

All three paths require the same core documentation: proof of income (usually two years of tax returns and recent pay stubs), bank statements showing you have enough cash for closing costs, a credit report, and employment verification. The lender will order a home appraisal and inspection. If the appraisal comes in low, the deal stalls until the price is renegotiated or you add cash.

You must also show that you can afford the monthly payment. Lenders calculate your debt-to-income ratio by dividing your total monthly debt payments (mortgage, car loans, credit cards, student loans, child support) by your gross monthly income. Most lenders want this ratio at 43 percent or lower, though some allow up to 50 percent for VA loans if other factors are strong. A zero-down loan means a higher monthly payment, which makes this ratio tighter—you may not may have access to for as large a loan as you could with a down payment.

Closing costs (title insurance, appraisal, lender fees, attorney fees) typically run 2 to 5 percent of the loan amount. Even with zero down, you need cash for these costs. Some lenders allow you to roll closing costs into the loan, but this increases what you owe and the interest you pay over time. Some sellers will cover closing costs as part of the purchase agreement, which is worth negotiating.

How to compare the real cost of zero-down loans

The monthly payment difference between zero-down and 20-percent-down is significant. On a $300,000 home with a 7 percent interest rate over 30 years, a 20-percent-down loan ($240,000 borrowed) costs about $1,596 per month. A zero-down loan ($300,000 borrowed) costs about $1,995 per month—nearly $400 more. Add mortgage insurance (if conventional) or the VA funding fee amortized into the payment, and the gap widens further.

To decide which path makes sense, calculate the total cost over the years you plan to stay in the home. If you will sell or refinance in five years, the upfront costs (VA funding fee, USDA may provide fee, PMI) matter less. If you plan to stay 15 years or longer, the accumulated interest and insurance costs become substantial. A mortgage calculator that lets you input different down payments and insurance costs will show you the real numbers for your situation.

What disqualifies you or makes approval harder

A credit score below 620 will block most lenders, though some credit unions and specialized lenders go lower. Recent late payments (within the last two years) or collections accounts make approval difficult. Bankruptcy within the last two years is a hard stop for most lenders; after two years, some will consider you if other factors are strong.

High debt-to-income ratio is the most common reason for denial on zero-down loans. If you carry $1,500 in monthly debt payments and earn $3,500 gross per month, your ratio is already 43 percent—you have almost no room for a mortgage payment. Paying down credit cards or car loans before applying can improve your chances. For USDA loans, income above the limit disqualifies you, and there is no exception. For VA loans, a dishonorable discharge or certain other discharge statuses make you ineligible. For all loans, a property that fails inspection or appraises below the purchase price can kill the deal unless you renegotiate or add cash.

Frequently Asked Questions

Can I use a VA loan and a USDA loan at the same time?

No. You can hold both a Certificate of may be able to access and USDA may be able to access, but you can only use one loan to buy a single property. You choose which program offers the better terms for your situation. Some lenders will let you apply for both and compare offers before deciding.

What happens if the home appraises below the purchase price?

The lender will not finance more than the appraised value. You can renegotiate the purchase price down, pay the difference in cash, or walk away. With zero down, you have no equity cushion, so a low appraisal is a real problem. Get a pre-appraisal estimate from the seller's agent before making an offer.

Can I refinance out of mortgage insurance later?

With conventional loans, yes—once you reach 20 percent equity (through payments or home appreciation), you can refinance to remove PMI. VA and USDA loans do not have mortgage insurance, so there is nothing to remove. However, refinancing costs money in fees and a new appraisal, so calculate whether the savings justify the cost.

Do I need a co-signer for a zero-down loan?

Not usually. VA and USDA loans do not require a co-signer if you meet the income and credit requirements on your own. Conventional lenders may ask for a co-signer if your debt-to-income ratio is too high or your credit is weak, but it is not standard for zero-down loans.

What if I have student loans—do they count against my debt-to-income ratio?

Yes. Lenders count the full monthly payment on student loans, even if you are on an income-driven repayment plan. If your loans are in deferment or forbearance, some lenders count 0.5 percent of the balance as a monthly payment instead. Ask your lender how they will calculate it before you apply.