You can buy a house with no money down when you use certain types of government-backed mortgages, such as VA loans and USDA loans. The federal government offers no-money down loans through different agencies in order to encourage homeownership among certain populations and areas of the country.

You may be eligible to take advantage of these government-backed loans, provided you can qualify or otherwise show eligibility. Even if you’re not able to meet the guidelines for no money down loans, you may still be able to qualify for a mortgage program with a very low down payment.

Read on to learn more about how to buy a house with no money down.

Can You Buy a House With No Money Down?

Yes, you can buy a house with no money down using either a VA loan or a USDA loan, provided you can meet the requirements that accompany these loan types. With a VA loan, you must be a service member, veteran, or qualifying spouse and meet minimum service requirements. A USDA loan, on the other hand, requires the borrower to be purchasing a home in a qualifying rural area.

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Types of No Down Payment Mortgages

You can get a zero down payment home loan using either a VA loan or USDA loan. The following is a look at both types of loans, their benefits, and what you’ll need to qualify.

VA loans

VA loans are available to active-duty military, veterans, and surviving spouses who meet all necessary qualifying requirements. The VA loan program is a popular option among qualifying borrowers because it doesn’t require a down payment, limits certain closing costs, and offers mortgages at relatively low rates. 

VA loan benefits

VA loans offer several significant advantages for eligible borrowers, making them an attractive option for veterans and active service members looking to purchase a home:

Estimate how much your monthly payments would be with a VA loan using our free VA loan calculator. You can also use our VA loan affordability calculator to see how much home you can afford with this type of financing.

VA loan qualification requirements

To qualify for a VA loan, you must meet both the VA’s eligibility criteria and your lender’s specific requirements. Here’s an overview of what you’ll need:

VA eligibility requirements:

  • Military status: Applicants must be active-duty personnel, veterans, or eligible surviving spouses.
  • Service duration: Fulfill the minimum service time requirements, which differ depending on when you served.
  • Intended use: Commit to using the purchased property as your primary residence.
  • Documentation: Secure a Certificate of Eligibility (COE) through the Department of Veterans Affairs.

Lender requirements (may vary by lender):

  • Minimum credit score (500+ at Griffin Funding)
  • Proof of income
  • Debt-to-income ratio within acceptable limits
  • Pest inspection and VA appraisal
  • No recent major credit events or bankruptcies (or meet additional terms if applicable)

We recommend applying for VA loan pre-approval before you start house hunting to help you understand your budget.

USDA Loans

USDA loans are offered by the United States Department of Agriculture. They’re also known as rural development loans because they’re used for buying homes and agricultural properties in rural areas of the country. The program offers two types of loans for single-family housing—direct and guaranteed loans—and is intended to help individuals making below a certain income purchase homes in rural areas.

USDA loan benefits

Here are the key benefits of USDA loans:

  • No down payment required
  • Competitive interest rates
  • No private mortgage insurance (PMI)
  • Backed by the federal government
  • Upfront fee of 1% of the total financed amount, due at closing
  • Low annual fee of 0.35% of the loan balance, included in monthly payments

While USDA loans have appealing benefits, make sure to compare the pros and cons before pursuing this type of financing. For example, USDA loans are only available in specific rural and suburban areas, so the home you’re interested in may not qualify. Additionally, there are income limits that restrict eligibility.

USDA loan qualification requirements

In order to qualify for a USDA loan, the property you’re purchasing has to be located in an area that the USDA classifies as rural. Additionally, you must meet the following requirements:

  • U.S. citizenship is required
  • 600+ credit score 
  • Three years since declaring bankruptcy or experiencing foreclosure
  • Adjusted income cannot exceed 115% of the chosen area’s median income based on your family size
  • Borrowers must meet a minimum DTI ratio

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Low Down Payment Home Loans

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While VA loans and USDA loans are the only two true zero down payment mortgage programs, there are other types of financing that allow you to buy a home with a low down payment. 

FHA loans

Federal Housing Administration (FHA) loans are federally-backed mortgages that have less stringent eligibility requirements compared to a USDA loan or VA loan. An FHA loan can be used to buy a home that you intend to use as your primary residence. If you qualify for this loan program, you can potentially secure a mortgage with as little as 3.5% down.

While FHA loans can be great for home buyers that don’t have a lot of capital on hand for a down payment, they come with other costs that are worth considering. One of the downsides of FHA loans, for instance, is the mortgage insurance premiums (MIP) you’ll have to pay. MIP is required for all FHA loans regardless of your down payment and you’ll typically be required to pay it for the life of the loan.

Conventional loans

While you may be under the impression that you need a 20% down payment to get a conventional loan, that’s not always the case. In reality, conventional loans can offer flexible down payment requirements, although you’ll have to meet somewhat stringent credit and income requirements in order to qualify.

You can expect the minimum down payment for a conventional mortgage to be around 3%, but the location of the house and your property ownership history can push the minimum higher. The average down payment for a home buyer typically falls around 13%. 

DSCR loans

DSCR loans are a type of investment property loan. While there is no such thing as a zero-down investment property loan, there are creative ways that you can come up with the down payment using other people’s money (OPM). Here are the steps to buy investment properties through real estate syndication:

  1. Form an LLC (Wyoming, Delaware, and Nevada are great states to form an LLC in).
  2. Register for foreign authority in the state(s) you wish to purchase investment properties in.
  3. Ensure the operating agreement names you as the “Managing Member” of the LLC and that you retain at least 26% membership interest. You’ll be personally guaranteeing the DSCR loan, so you’ll need to have good credit and more than a quarter of the ownership of the LLC.
  4. Next, you’ll need to raise at least 20% of the purchase price of the property or properties that you are looking to acquire. For example, if you are buying a $500,000 investment property, you’ll need to pool together $100,000 from one or multiple investors for the required down payment.

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How to Choose a Lender Who Offers Zero Down Home Loans

When selecting a lender for a zero down mortgage, consider the following:

  • Lender experience: Look for lenders with extensive experience in VA or USDA loans. These lenders are more likely to guide you smoothly through the process.
  • Compare rates: Lenders choose which interest rates to offer you, so don’t be afraid to shop around to make sure you get the most competitive offer.
  • Customer reviews: Read reviews from other borrowers to gauge the lender’s customer service quality. Look for feedback on responsiveness, transparency, and overall satisfaction.
  • Loan processing time: Inquire about the typical time frame for loan approval and closing. Some lenders may be more efficient than others in processing zero down mortgages.
  • Additional fees: Ask lenders about any additional fees or charges associated with the loan. While VA and USDA loans have some standard fees, lenders may vary in other costs.

See if You Qualify for a Zero Down Mortgage

No down payment home loans such as VA loans and USDA loans can be great financing options for those who qualify, as you don’t have to put money down and you can take advantage of low rates. If you’re not eligible, you may be able to qualify for an FHA or conventional mortgage and get the house you’ve been dreaming of owning. At Griffin Funding, our mortgage experts can help you explore your options for getting a no or low down payment mortgage.

At Griffin Funding, we offer a wide range of traditional and non-traditional mortgage products that help people from all walks of life achieve homeownership. Our financing options can help you secure a traditional mortgage, get a loan with no job, or refinance your current mortgage. 

Contact us today to learn more about our mortgage products or get started online today to begin the pre-approval process.

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Frequently Asked Questions

What credit score do you need to buy a house with no money down?

To qualify for a mortgage with no money down, you'll still need to meet your lender's credit score requirements. While VA and USDA loans have flexible credit requirements, lenders typically require you to have a credit score of at least 620 to qualify for a zero down option. However, some lenders may have different minimum credit score requirements, so it's best to check with multiple lenders.

What are the disadvantages of buying a house with no money down?

While getting a no money down home loan can help you secure financing to purchase a home, there are several potential drawbacks:
  • You start with little to no equity in your home: This means you don't have a financial cushion if you need to sell the home quickly. It can also limit your options for home equity loans or lines of credit in the near future.
  • You'll pay more monthly: Since you're financing the entire purchase price, your loan amount is larger, resulting in higher monthly payments. This can strain your monthly budget and leave less room for other expenses or savings.
  • You'll likely pay more in interest over the life of the loan: With a larger loan amount and potentially higher interest rate, the total interest paid over the life of the loan can be substantially more than with a traditional mortgage that includes a down payment.
  • Higher risk of becoming "underwater" on your mortgage if property values decline: Without an equity buffer, even a small dip in home values could leave you owing more than your home is worth.

Can you refinance a zero down mortgage?

Yes, you can refinance a zero down mortgage. For VA loans in particular, there are two main refinancing options:
  • VA streamline refinance (Interest Rate Reduction Refinance Loan or IRRRL): This option lets you refinance your VA loan for a lower interest rate with minimal paperwork. It's a quick and easy way to lower your monthly payments.
  • VA cash-out refinance: This loan allows you to refinance your VA loan and take out cash from your home's equity. You can use this to consolidate debt, fund home improvements, or for other financial needs. It's also an option for converting a non-VA loan into a VA loan.
USDA loans have a streamline refinance option as well. With a USDA streamline refinance, you can adjust your rate or loan term with minimal paperwork, lower costs, relaxed credit requirements, and no appraisal.

Do no down payment loans have income limits?

Yes, some no down payment mortgages have income limits. USDA loans set income thresholds based on household size and the property’s location. In general, to qualify for a USDA loan, your income can’t exceed 115% of the area’s median income. 

VA loans, on the other hand, do not have income limits. Borrowers will have to earn enough income to be able to repay the loan, but you won’t be disqualified from a VA loan for making too much money.

Do you still need to pay for closing costs with a no down payment mortgage?

Yes, you will still be responsible for paying for closing costs with a zero down mortgage. This means you will have to pay for things like appraisal fees, lender fees, title insurance, prepaid property taxes, and homeowners insurance. 

However, both VA loans and USDA loans limit the closing costs that borrowers can pay, particularly when it comes to lender fees. This prevents lenders from overcharging borrowers or adding on junk fees. 

You can mitigate some of these upfront closing costs by rolling them into the loan or obtaining seller concessions or lender credits. VA loans allow seller concessions up to 4% of the purchase price while USDA loans limit seller concessions to 6% of the purchase price. 

Can I buy a second home or investment property with a zero down mortgage?

No, VA loans and USDA loans are intended for primary residences only. Thus, the home you purchase with either of these loans must serve as your main residence. However, you can use either of these mortgages to purchase a multi-unit property and live in one unit while renting out other units. In this way, you can earn rental income to cover your mortgage payment while still fulfilling the primary residence requirement.

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 24 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 12 years in business.