How does a zero-down mortgage work?
Zero-down mortgages are designed to help low- to moderate-income borrowers purchase a home without a traditional down payment, which can range up to 20% of the home’s price. These loans offer up to 100% financing, allowing qualified buyers to enter the housing market sooner rather than waiting years to save.
A zero-down mortgage makes it possible to buy a home with no down payment, but you’ll have to meet specific qualifications.
“It can take a buyer many years to save for a down payment,” said David Lee, a mortgage loan officer with iQ Mortgage. “If a buyer is qualified, using a zero-down mortgage can help them purchase their home without waiting. This is especially helpful for borrowers who have trouble saving a large sum of money.”
A zero-down mortgage enables borrowers to participate in a rising market. Otherwise, home values and down payment requirements could rise faster than borrowers’ ability to save, locking out many otherwise qualified buyers from the housing market. A zero-down mortgage helps them buy now and start building wealth immediately through their home's rising equity.
The downside of these loans is that borrowers have very little home equity. If home values fall or they need to sell, they could end up owing more than their homes are worth. This leaves them stuck in their homes, unable to move to be with family, take advantage of job opportunities or get into better neighborhoods.
» MORE: Homebuying checklist
Types of zero-down mortgage programs
If you’re interested in getting a zero-down mortgage, you have numerous programs to consider. Many have specific requirements, so make sure you qualify before applying.
Veterans Affairs (VA) loans
Veterans, active-duty soldiers and their spouses qualify for zero-down mortgages through the VA. These loans have no down payment, competitive interest rates, limited closing costs and no mortgage insurance. VA loans are a lifetime benefit, and you may qualify to use this loan program multiple times.
Department of Agriculture (USDA) loans
USDA loans help low- and moderate-income borrowers in eligible rural areas purchase homes with up to 100% financing. While USDA loans don’t require mortgage insurance, they do charge an upfront guarantee fee (1% of the loan amount) and an annual fee of 0.35% of the loan amount.
Bank of America Down Payment Grant
This grant program provides a grant of up to 3% of the home purchase price, up to a maximum of $10,000. It does not require repayment. Borrowers can get a zero-down mortgage on qualified loans by pairing this grant with the bank’s Affordable Loan Solution.
Chenoa Fund for Federal Housing Administration (FHA) loans
Borrowers take out an interest-free second mortgage through CBC Mortgage Agency for 3.5% or 5% of the purchase price. After the borrower makes 36 (3.5%) or 120 (5%) consecutive, on-time payments on their FHA first mortgage, the second loan is forgiven.
80/20 mortgage
Some borrowers may qualify for a “piggyback” mortgage of 20% of the purchase price, which eliminates the need for a down payment. These loans usually have a higher interest rate, and there may be additional fees or costs for adding a second mortgage on top of your first.
State and local programs
Other programs reduce or eliminate closing costs and down payment requirements for qualifying borrowers. These programs are typically offered by nonprofits, governmental bodies and other organizations. The U.S. Department of Housing and Urban Development has a list of resources by state.
Lender credits
Additionally, borrowers can ask their lender and the home seller for assistance buying the property. The lender can provide credits that reduce upfront costs. Home sellers can provide concessions that help cover closing costs.
» MORE: How much house can I afford?
Who qualifies for a zero-down mortgage?
Zero-down mortgages let qualified buyers purchase a home without a traditional down payment. While each program has its own rules, lenders usually look at:
- Income and employment stability
- Credit history and score
- Debt-to-income ratio (DTI)
- Property type and location
Understanding both general requirements and program-specific rules can help you figure out which options you qualify for.
Credit score and DTI requirements
Lenders use credit scores and DTI ratios to evaluate whether you can handle a zero-down mortgage. Here’s a quick comparison of common programs:
| Program | Minimum credit score | Typical DTI limit |
|---|---|---|
| VA loans | No official minimum; 620 recommended | Around 41% |
| USDA loans | 640 | 41% |
| Private programs | 620 to 700 | 36% to 43% |
Even if your numbers are slightly below these thresholds, strong savings, a co-borrower or steady employment may help you qualify.
Program-specific eligibility
To qualify for a zero-down mortgage, you may have to fit a specific borrower profile. Here are the eligibility requirements for the most common zero-down mortgage programs.
VA loans
- For veterans, active-duty members and certain National Guard or Reserve members
- Must have a valid Certificate of Eligibility
- Credit and income must meet lender standards
USDA loans
- For homes in eligible rural or suburban areas
- Must meet local income limits
- Home must be the primary residence
Private zero-down programs
- Offered by banks or credit unions, often targeting first-time buyers or specific professions
- Requirements vary but typically include strong credit, proof of income and sometimes employment in a qualifying field
Pros and cons of a zero-down mortgage
Getting a zero-down mortgage is a wise choice for many borrowers. It helps them buy a home sooner and start building equity through their monthly payments and home value appreciation. There are numerous no-down-payment mortgage loans to choose from, and down-payment assistance programs can reduce or eliminate your out-of-pocket expenses.
While these loan programs make homebuying easier, there are risks borrowers should understand before submitting an application. If you don't qualify or aren't comfortable with the loan terms, speak with your loan officer or mortgage broker about other low-down-payment programs available to help you buy your next home.
Pros
- No down payment makes home purchase more affordable
- You can use your savings instead for home improvements, moving costs and more
- You can start building family wealth sooner through appreciation and loan paydown
- Many zero-down mortgages don’t have mortgage insurance
Cons
- You’ll start out with little to no equity
- If home prices fall and you need to sell, you could be underwater on your mortgage
- Larger monthly payments could strain your finances
- Not all lenders offer zero-down mortgages
Alternatives to zero-down mortgages
A zero-down mortgage isn’t an option for every borrower. Consider these alternatives that might be a better fit for you.
- Conventional mortgages, some of which require a down payment as low as 3%
- An FHA loan with a 3.5% down payment
- Down payment assistance programs
- Banks that offer loan assistance for underserved communities
- A lease-to-own agreement with a private seller
- A penalty-free withdrawal from your IRA (up to $10,000 for a first-time home purchase)
FAQ
What credit score do I need for a zero-down loan?
The credit score required for a zero-down loan varies by loan program and lender. The VA and USDA do not have minimum credit score requirements. However, lenders that offer these loans typically require scores of at least 640 and 620, respectively.
How much of a down payment do I need for a home?
Most loan programs require a down payment of at least 3%. However, some borrowers qualify for zero-down mortgages that do not require a down payment. Talk with your loan officer or mortgage broker to see which programs you qualify for.
Are USDA or FHA home loans better for first-time buyers?
These loan programs help low- to moderate-income borrowers qualify to buy a home. USDA home loans offer up to 100% financing for qualified borrowers who want to live in eligible areas of the country. FHA loans require at least a 3.5% down payment, but they have fewer location restrictions than USDA loans.
Who qualifies for a zero-down-payment mortgage?
Zero-down mortgages are typically available to specific groups, such as veterans, active-duty military members and eligible first-time homebuyers. Programs like VA loans and certain USDA loans allow qualified borrowers to purchase a home with no down payment. Lenders still require proof of income, a strong credit profile and the ability to cover closing costs, even if the down payment is zero.
Is zero down payment a good idea?
A zero-down mortgage can make homeownership more accessible, especially if you don’t have substantial savings. However, it can increase monthly payments and overall interest costs since you’re financing the full home price. It may also limit your equity and make it harder to refinance or sell in the short term. Zero down is often best for buyers with stable income, good credit and a long-term plan to stay in the home.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- U.S. Department of Agriculture, “Single Family Housing Guaranteed Loan Program.” Accessed Nov. 14, 2025.
- Bank of America, “Bank of America’s Community Homeownership Commitment.” Accessed Nov. 14, 2025.
- U.S. Department of Veterans Affairs, “VA Home Loans.” Accessed Nov. 14, 2025.
- CBC Mortgage Agency, “Down Payment Assistance For Homebuyers.” Accessed Nov. 14, 2025.
