How to Buy a House With No Money Down

What types of mortgages don’t require down payments?

The most common mortgages with no down payment are VA loans, backed by the U.S. Department of Veterans Affairs, and USDA loans, which are backed by the U.S. Department of Agriculture. Each program has different standards for credit scores, loan limits and required documents.

VA loans

VA loans are mortgages backed by the U.S. Department of Veterans Affairs. Mortgages in the VA program do not require a down payment. The loans are available for current and former service members who meet certain criteria, including:

• Serving 90 consecutive days in wartime, or
• Serving 181 consecutive days in peacetime, or
• Serving at least six years in the National Guard or Reserves, or
• Being the spouse of a service member killed in the line of duty or due to duty-related injuries, or the spouse of a service member who is missing in action or a prisoner of war

Each VA lender will also have its own qualifications for a home loan approval.

• Credit: Lenders will look at credit history, and while there's no credit score requirement set by the VA, lenders will have their own criteria. Most lenders require a minimum credit score of 620, though some will approve a VA loan with a lower score.
• Income: VA loans do not have an income requirement, but the lender will look at the monthly income left over after you pay all expenses.
• Appraisal: There is a special VA loan appraisal process that homes must go through before a lender will approve the mortgage.
• Loan limits: There are no maximum loan limits on VA loans as long as you have full entitlement.

VA loans are offered by various VA loan lenders, including banks, mortgage companies and credit unions.

USDA loans

The purpose of USDA loans is to promote homeownership in eligible rural areas. The house must be used as a primary residence. Each lender will also have other requirements for loan approval.

• Credit: Although the USDA loan program does not have a required minimum credit score, most lenders want to see a credit score of 580 or higher. Lenders will also consider the length of the credit history, credit utilization, and credit repayment history.
• Income: USDA mortgages for single-family homes have income limits that vary by county. According to the USDA, applicants must have a household income that doesn’t exceed 115% of the median household income. You can determine if your income falls within the qualifying range on the USDA website. In addition to income limits, USDA lenders also require at least one year of income history and a debt-to-income ratio no higher than 41% (factoring in the new mortgage payment).
• Loan limits: The USDA does not set a maximum purchase price. The amount applicants can borrow is based on their ability to repay.

There are many lenders that offer USDA loans. These companies are also available to answer questions about eligibility and different loan scenarios.

Step-by-step guide to buying a house with no money down

The process for a no-down-payment mortgage is similar to that for other loans. You must meet the specific qualifications set by the lender for the type of loan you are requesting. The lender will collect information and documents to go to an underwriter for approval.

The only difference is that you will not have to pay a down payment at closing like you would with other types of mortgages, although there will still be other traditional closing costs.

1. Check your credit score

Review your credit reports from all three major credit bureaus and check your credit score. Most no-money-down programs require a minimum credit score — typically 580 for USDA loans and 620 for VA loans, though some lenders may require higher scores. Dispute any errors you find and work to improve your score if it's below the threshold for your desired loan program.

2. Determine which loan program you qualify for

Research which no-money-down loan programs you're eligible for based on your circumstances. VA loans require military service or eligible spouse status. USDA loans require purchasing in a qualified rural area and meeting income limits.

Navy Federal Credit Union and certain state and local programs may have their own eligibility requirements. Review the specific criteria for each program to identify your best options.

3. Gather required documentation

When you apply for a no-down-payment mortgage, you will need to provide a number of supporting documents. These items include:

• Photo identification
• Proof of income, W-2s and 1099 forms
• State and federal tax returns
• Social Security and retirement income documentation
• Bank and asset statements
• Child support or divorce settlement amounts

Some lenders may also require a letter from your employer verifying your salary, length of employment, and proof of consistent rental payments if you’re living in a rental property. There will also be loan-specific document requirements depending on the type of mortgage you apply for.

For example, a VA loan requires a Certificate of Eligibility (COE) showing military service qualifications. A USDA loan lender will need to review documentation about the house to ensure it meets the location requirements.

4. Get preapproved for a mortgage

Apply for preapproval with lenders who offer your chosen loan program. The lender will review your credit, income, employment history and debt-to-income ratio to determine how much you can borrow.

A preapproval letter shows sellers you're a serious, qualified buyer and strengthens your negotiating position. Compare offers from multiple lenders to find the best interest rates and terms.

5. Find a real estate agent familiar with your loan type

Work with a real estate agent who has experience with VA, USDA or other no-money-down loan programs, as they can help you identify eligible properties. For example, homes in USDA-designated rural areas or properties that meet VA appraisal requirements. An experienced agent will also understand the unique aspects of these transactions and can guide you through the process.

6. Search for eligible homes within your budget

Begin your home search focusing on properties that meet your loan program's requirements and fall within your preapproved amount. For USDA loans, verify the property is in an eligible rural area using the USDA's online map tool. For VA loans, ensure the property meets minimum property requirements.

Calculate your total monthly housing costs, including principal, interest, taxes, insurance and any HOA fees, to ensure they fit comfortably in your budget.

7. Make an offer and negotiate terms

Once you find the right home, work with your agent to submit a competitive offer. Include your preapproval letter to demonstrate you're a qualified buyer. Be prepared to negotiate on price, closing date and contingencies.

Some sellers have concerns about government-backed loans' stricter requirements or longer closing timelines. Your agent can help position your offer competitively.

8. Complete the home inspection and appraisal

Schedule a home inspection to identify any potential issues with the property. While not always required, an inspection protects you from unexpected repairs.

The lender will also order an appraisal to verify that the home's value meets or exceeds the purchase price. VA and USDA loans have specific property requirements, and the appraiser will assess whether the home meets these standards. If issues arise, you may need to negotiate repairs with the seller or adjust your offer.

9. Finalize your mortgage and prepare for closing

Work with your lender to complete the underwriting process. Provide any additional documentation requested promptly. The underwriter will verify all your financial information and ensure the property meets loan requirements.

Review your Closing Disclosure, which you'll receive at least three days before closing, to understand your final loan terms, interest rate, monthly payment and closing costs. Plan for how you'll cover closing costs, whether through seller concessions, lender credits or assistance programs.

10. Close on your home and move in

Attend your closing appointment to sign all loan documents and finalize the purchase. You'll receive the keys to your new home once all paperwork is complete and the funds have been transferred.

While you won't pay a down payment, you'll still need to cover remaining closing costs not covered by seller concessions or assistance programs. After closing, set up your mortgage payment, transfer utilities to your name, update your address and begin the moving process.

» READ MORE: How to get a mortgage

Pros and cons of buying a house with no money down

Mortgages that don’t require a down payment can be helpful if you don't have access to the funds for a down payment. Maybe you are a first-time homebuyer, don’t have savings or have savings but want to keep those funds for another purpose.

But not paying a down payment means higher monthly loan costs. Sometimes, it might be better to make a small down payment if you can manage it. For example, a loan through the Federal Housing Agency, or an FHA loan, requires a down payment of 3.5% of the purchase price.

Alternative ways to buy a house with no money down

If you don't qualify for a VA or USDA loan, several alternative strategies can help you purchase a home with little to no down payment. These options range from creative financing arrangements to assistance programs and strategic use of existing resources.

Down payment assistance programs and grants

Down payment assistance programs help cover your down payment and closing costs. State and local housing agencies, nonprofits and some employers offer these programs.

You can get grants that don't need to be repaid, forgivable loans that are forgiven after you live in the home for several years, or deferred loans with no monthly payment that you repay when you sell.

Most programs require you to be a first-time homebuyer, meet income limits, complete a homebuyer education course and use the home as your primary residence. Visit your state's housing finance agency (HFA) website or ask your lender about available programs in your area.

State and local no-money-down programs

Many states, counties and cities offer their own zero-down-payment loans. These programs often target first-time homebuyers, essential workers such as teachers and nurses, or specific neighborhoods.

State housing finance agencies offer loans with down payments ranging from 0% to 3%, below-market interest rates and reduced mortgage insurance. Some credit unions also provide zero-down mortgages to members. Navy Federal Credit Union offers a no-down-payment loan to all members, not just military personnel.

Check with local credit unions, contact your county housing authority or ask your real estate agent about programs in your area.

Gift funds from family members

You can use gift money from family members to cover your entire down payment and closing costs. Parents, grandparents, siblings or spouses can give you funds to buy a home.

You'll need a signed letter stating the money is a gift, not a loan. Your lender will need to see the money transfer from the donor's account to yours. FHA loans allow 100% of your down payment to come from gifts. Conventional loans may require you to contribute a small amount of your own money.

Seller concessions and lender credits

You can ask the home seller to pay some or all of your closing costs. This reduces the cash you need upfront when combined with a low-down-payment loan.

Different loan types have different limits. Conventional loans allow up to 3% of the purchase price, FHA loans allow up to 6%, VA loans allow up to 4% and USDA loans allow up to 6%. You'll need to offer a competitive price and negotiate this when you make your offer.

Lender credits let you accept a slightly higher interest rate so the lender covers your closing costs. This lowers your upfront costs but raises your monthly payment.

House hacking

House hacking refers to buying a two- to four-unit property, living in one unit and renting out the others. The rent you collect helps pay your mortgage.

You can use FHA loans with 3.5% down, VA loans with 0% down or conventional loans with as low as 5% down. Lenders count the rental income when deciding how much you can borrow. Look for duplexes, triplexes or fourplexes in your area and get preapproved for an owner-occupied loan.

Assumable mortgages

An assumable mortgage lets you take over the seller's existing loan, including their interest rate. If they have a low rate, you could save money and might need less cash upfront.

VA, FHA and USDA loans can usually be assumed, but you must still qualify with the lender. If the seller has built up equity, you'll need to pay the difference between what they owe and the sale price. This works best when current interest rates are much higher than the seller's rate.

Lease-to-own

Lease-to-own lets you rent a home with the option to buy it later, usually after one to three years. Part of your rent goes toward your down payment.

You'll pay an upfront fee of 1% to 5% of the purchase price, and a portion of your monthly rent builds your down payment. This gives you time to improve your credit and save money. The purchase price is usually set when you sign the lease.

Have a real estate attorney review any lease-to-own agreement before you sign to protect your interests.

» COMPARE: Types of mortgage loans

Calculate how much house you can afford with a no-down-payment mortgage

With a no-payment-down mortgage, it's important to calculate how much you can afford for a monthly payment. Several factors can influence your monthly payment, including the interest rate, loan term, down payment and type of mortgage. If you don’t put any money down, the monthly payment will be higher than if you do put money down.

There are resources available to help you calculate a realistic house price based on the criteria you provide. ConsumerAffairs offers a calculator that will estimate the home price you can afford using your income, interest rate, mortgage term, down payment and the state you live in.