Can You Buy a House With No Money Down?

By Bill Lyons | Published on June 27, 2023

You can buy a house with no money down when you use certain types of government-backed mortgages. 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.

The overall benefit to federally backed mortgages is the fact the government guarantees repayment of the loan to the lender. That means if a borrower defaults on the mortgage, the federal government pays the lender the remaining amount. In turn, the lender is more likely to approve an applicant for either type of mortgage due to the fact there’s practically no risk to them in the event of a default.

Read on to learn more about the types of federal loans that help you buy a house with no or little money down. You may find it’s easier to buy a house than you think.

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.

Both VA loans and USDA loans are unique in that they allow home buyers to get a mortgage with no money down. However, keep in mind that both of these loans have very specific requirements and rules. In the next section, we’ll go into more detail on what each of these two loan types entails.

Types of No Down Payment Mortgages

You can get a no down payment mortgage from two government programs—the catch is that you must be a qualifying veteran or buying a property in a rural area that meets USDA eligibility requirements. The following is a look at both types of loans, their benefits, and what you’ll need to qualify.

VA loans

A VA loan is a type of mortgage that’s offered as a benefit for having served in the United States military. It’s only available to active service members, veterans, and qualifying spouses. With VA loans, the VA agrees to reimburse lenders up to a certain amount in case of a default, thus allowing lenders to offer lower rates and better terms.

VA loan benefits

The major benefit of a VA loan is the fact that no down payment is required and the interest rates tend to be lower than conventional mortgage rates. The difference between VA loan rates and conventional rates varies from lender to lender, but a VA loan rate can be better since the loan is partially guaranteed by the VA.

Another significant benefit of a VA loan is that it doesn’t require private mortgage insurance (PMI) and closing costs are limited. This makes a VA loan a great option for qualifying borrowers in search of affordable financing.

VA loan qualification requirements

A Certificate of Eligibility (COE) is required to get a VA loan from a lender. You can get this document from the VA before applying for a home loan. The COE serves as proof that you meet the minimum active-duty requirements and qualify for VA benefits.

USDA Loans

USDA loans are offered by the United States Department of Agriculture. They’re also known as rural mortgages 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

The major benefit of a USDA loan is that it allows buyers to purchase a home with no down payment. Lenders are able to provide financing at competitive rates with no down payment because, like VA loans, USDA loans are guaranteed by the USDA, offering the lender a greater sense of security.

There is also no private mortgage insurance requirement for a USDA loan. Instead, a USDA loan requires an upfront fee that’s due at the time of closing and an annual fee that’s included in the monthly mortgage payment. The upfront fee is 1% of the total finance amount, and the annual fee is 0.35% of the loan balance.

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
• A FICO score of 600 or higher
• Three years since declaring bankruptcy or experiencing foreclosure
• Adjustable 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

In the event you can’t qualify for buying a house with no money down, you may be able to get a home loan with a low down payment instead. By applying for financing options like an FHA loan or even a conventional loan, you can get a mortgage with a lower than average down payment. Below we take a closer look at what you can expect from these two types of home loans.

FHA loans

Federal Housing Administration (FHA) loans are federally-backed mortgages that have less stringent eligibility requirements than a VA or USDA 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 5%, but the location of the house and your property ownership history can push the minimum higher.

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.

We’re a lender who wants to help you buy property that meets your immediate needs and fits your long-term homeownership goals. 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 and what you need to get started with the mortgage process.

Bill Lyons

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 22 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 10 years in business.