Can You Buy a House With No Money Down?

By Bill Lyons | Updated on October 25, 2024

Most people need mortgages to be able to afford to purchase a home, but you might know that with many home loans comes the requirement of a down payment. Unfortunately, this can be a big hurdle for prospective homeowners who might be wondering, “Can you buy a house with no money down?”

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 zero down payment home loan 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

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:

• No down payment required
• Lower interest rates compared to conventional mortgages
• No private mortgage insurance (PMI) needed
• Limited closing costs
• VA loan rates are competitive due to government backing
• Increased affordability for qualifying borrowers

These benefits make VA loans an excellent choice for those who qualify and are seeking affordable financing options for homeownership.

Find out how much your monthly payments will be with the VA loan calculator. Insert different down payment amounts and interest rates to see how much you can save by making a larger upfront investment or getting better terms from a lender.

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)

It’s important to note that while the VA sets certain eligibility criteria, individual lenders may have their own additional requirements. These can include minimum credit scores, income verification, and other financial factors. Be sure to discuss specific requirements with your chosen lender, as they can vary.

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 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

USDA loans offer several attractive advantages for eligible buyers. 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 finance amount, due at closing
• Low annual fee of 0.35% of the loan balance, included in monthly payments

These benefits make USDA loans an appealing option for those who qualify and are looking to purchase a home in an eligible rural area. The combination of no down payment, competitive rates, and no PMI can significantly reduce the initial costs of homeownership for many buyers.

However, there are pros and cons of USDA loans you should be aware of. 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
• 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

Unfortunately, no down payment first-time home buyer loan programs aren’t available from government agencies, unless you choose VA or USDA loans. However, if you are a first-time home buyer, you might qualify for an FHA loan, which offers a low down payment option of 3.5%, much lower than the average down payment.

Conventional loans also allow you to put down as little as 3% as long as you meet other, potentially more stringent lending requirements. Additionally, many states offer down payment assistance to help you cover the initial investment involved in buying a home.

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 3%, but the location of the house and your property ownership history can push the minimum higher.

DSCR loans

Do zero-down DSCR loans exist? 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.

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.

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 or apply online today to get pre-approved.

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.