You can get a no-down-payment mortgage, although you’re more likely to find a low-down-payment mortgage. Many mortgages require a down payment, even a minimal 3%. Although 20% down is the rule of thumb, many homebuyers put down less than that.
While it’s true that the best terms are generally reserved for well-qualified applicants who can make a bigger down payment, you can take advantage of various mortgage programs that demand far less.
But if you want a no-down-payment home loan, the loan types available to you may be limited. Typically, no-down-payment mortgages come in the form of government loans or special lender programs. Homebuyers with low credit scores might not qualify for some programs.
Zero-down-payment loan options can help borrowers who lack the savings to put toward a home but otherwise qualify for a loan. Keep in mind that you’ll generally need to put at least 3% down for conventional loan. Here are a few zero-down home loan programs to explore with 100% financing for your primary residence.
VA Loans
The Department of Veterans Affairs offers a zero-down-payment loan and does not set a maximum loan amount, though there are caps on the amount of loan the VA will guarantee. Veterans and surviving spouses who want to apply must furnish a Certificate of Eligibility, a document that verifies the borrower’s eligibility.
The VA loan program has no minimum credit score, but most VA-approved lenders have credit score requirements. Borrowers need to pay an upfront funding fee, which can be financed or paid in full at closing. The VA funding fee ranges based on your down payment amount and whether you’ve already used a VA home loan benefit in the past. If your down payment is less than 5%, the VA funding fee is 2.15% for the first use or 3.3% after your first use. VA home loans do not require mortgage insurance.
USDA Loans
No-down-payment loans are available from the U.S. Department of Agriculture. The property must be in an eligible rural area and household income must meet guidelines for a buyer to use a USDA loan.
The USDA does not set a credit score requirement for USDA home loan guarantees, but applicants must show an ability to manage debt and pay bills. You’ll have an easier time getting a direct home loan from the USDA if you have a credit score of at least 640, but it’s possible to qualify with a lower score.
USDA direct loans don’t have mortgage insurance. Loans guaranteed by the USDA have an annual guarantee fee.
Good Neighbor Next Door
The Department of Housing and Urban Development’s Good Neighbor Next Door program is for teachers, law enforcement officers, firefighters and medical personnel. Eligible borrowers can purchase a HUD-owned single-family home for 50% off its list price.
The required down payment is as low as $100, and the buyer must live in the home as a primary residence for at least three years. Additionally, some professionals may qualify for grants and closing costs credits that can effectively reduce the down payment to zero.
Doctor Loan Program
Some lenders offer special loan programs for physicians, dentists, residents and fellows. Programs may have features designed for early career professionals, who frequently have big student loan bills but also have high earning potential.
Credit Unions
Many credit unions have zero-down mortgages, although they generally require membership to qualify. Promotions can change, so check with your credit union for the latest information.
Mortgage interest rates increased this week, according to the Mortgage Bankers Association. Mortgage application activity decreased in turn, showing that today’s buyers remain sensitive to minor fluctuations in rates.
Looking forward, mortgage interest rates are still forecasted to decline somewhat throughout 2024, as the Federal Reserve projects rate cuts will begin sometime later this year. Here are the current mortgage rates, as of June 5:
- 30-year fixed: 7.07% with 0.65 points (previous week: 7.05% with 0.63 points).
- 15-year fixed: 6.75% with 0.63 points (previous week: 6.66% with 0.69 points).
- 5/1 ARM: 6.37% with 0.63 points (previous week: 6.64% with 0.77 points).
- 3-year jumbo loans: 7.21% with 0.41 points (previous week: 7.22% with 0.43 points).
- 30-year FHA loans: 6.87% with 0.96 points (previous week: 6.85% with 0.95 points).
You’ll want to consider a number of factors when comparing the best mortgage lenders for no-down-payment loans.
- What programs do they offer? Because program offerings vary by lender, be sure the lender you choose offers several options for which you think you most qualify.
- Do you need to be a first-time homebuyer? Be sure to clarify the lender’s restrictions – you don’t want to waste your time with if you don’t qualify.
- What is the minimum credit score required? Although many no-down-payment government programs have minimum credit scores, often lenders may have their own stipulations.
- Is down payment assistance available? Some banks and financial institutions offer their own down payment assistance, while other lenders will work with state programs. Either way, make sure your lender is knowledgeable and able to offer options.
- How is the lender’s customer service? Check online lender reviews, such as with the Better Business Bureau, Trustpilot or the Consumer Financial Protection Bureau. If the lender is a local financial institution, you might reach out to family and friends.
A zero-down mortgage can be a great option for a homebuyer who has limited cash on hand but is otherwise well-qualified to purchase a home. But putting money down on a mortgage has benefits, too.
Pros of Zero-Down Mortgages
- Reserve savings. You can use the cash you would have used for a down payment to cover other expenses, such as closing costs or home improvements. Or you could leverage cash for investing.
- Buy a home faster. You could get into a home faster since you won’t have to save up for a down payment.
Cons of Zero-Down Mortgages
- Higher borrowing costs. You may see higher interest rates because your lender perceives more risk. Your monthly payment will also be higher, and you may be required to pay mortgage insurance.
- No home equity. You won’t immediately have some equity in the home if you don’t make a down payment. The more you pay down your mortgage, the more your equity goes up.
- Limited options. Most zero-down-payment mortgage programs have some sort of eligibility criteria in order for homebuyers to qualify, so this may not be an option for many borrowers.
If you can swing a down payment of any size, you will broaden your loan options and save on interest charges. Overall, your mortgage costs will be less if you can foot even a relatively small percentage of the loan value as a down payment. Consider these low-down-payment mortgage options:
FHA Loans
The Federal Housing Administration allows you to put as little as 3.5% down on a home purchase. Credit score requirements for an FHA loan may be more flexible than for conventional low-down-payment loans. Your FICO score must be at least 580 to make a 3.5% down payment. For scores between 500 and 579, you’ll need a 10% down payment.
Keep in mind that you’ll have to pay an upfront mortgage insurance premium, as well as an annual MIP that’s divided by 12 and added to your monthly payment. FHA also sets maximum loan limits that are dependent on where you’re purchasing a home.
Conventional 97 Loans
A Conventional 97 loan is a mortgage backed by the government-sponsored enterprises, Freddie Mac and Fannie Mae. As the name implies, the maximum loan-to-value ratio is 97% – in other words, you can put as little as 3% down.
There are no maximum income limits for this program, but you’ll need a credit score of 620 or higher in order to qualify, and at least one borrower must be a first-time homebuyer. The maximum loan amount is limited to the conforming loan limit for your area.
HomeReady by Fannie Mae
This program offers a 3%-down-payment loan for low-income homebuyers. That’s slightly lower than 3.5% for the FHA loan, but the credit guidelines are tougher. A Fannie Mae HomeReady loan requires at least a 620 credit score, and a score of 680 or higher could get better pricing. You don’t need to be a first-time homebuyer to qualify for a HomeReady loan.
Freddie Mac Home Possible Loans
This fixed-rate loan has a down payment as low as 3%, and borrowers can reduce their mortgage insurance once they reach 10% equity. Freddie Mac’s Home Possible program is available for first-time or repeat buyers with credit scores of 620 or higher.
Piggyback Loans
A piggyback loan is a second loan taken at the same time as your primary mortgage to cover a portion of your home’s purchase price when you make your down payment. This type of loan can reduce the cash you need to purchase a home and help you avoid private mortgage insurance. A piggyback loan can also ensure that your loan amount stays under conforming loan limits, which can make it easier to qualify for a government-backed loan.
If you’re having trouble affording a down payment, consider down payment assistance programs. Down payment and closing cost assistance programs are available nationwide, especially for first-time homebuyers or homebuyers who meet certain income requirements.
“There are various down payment assistance programs available, depending on your state, city and county, and a local lending specialist can provide you with that information,” says Ann Thompson, specialty lending executive at Bank of America. “There are also programs with a higher interest rate where you can get partial bank-paid credit to help with closing costs.”
Some banks have special programs for low- to moderate-income homebuyers, which may include down payment assistance. “The goal is to give people access to credit to help meet down payment requirements,” says Bill Banfield, executive vice president of capital markets at Rocket Mortgage.
Down payment assistance programs include:
- Grants: Organizations that provide grants to help cover down payments include the National Homebuyers Fund and state housing finance agencies.
- Second mortgage programs: You may be able to take out a second mortgage to cover your down payment and closing costs. In many cases, these loans can be forgiven, according to the Federal Deposit Insurance Corp. This can happen once you meet certain requirements, such as living in your house for a specified time period.
There is no single minimum credit score you need to get a no- or low-down-payment mortgage; it varies by program. For example, neither the VA nor the USDA sets a minimum credit score requirement for its home loans. With FHA home loans, you can get a mortgage with a credit score as low as 500, but you can reduce your down payment if your score is 580 or higher.
The important thing to remember is with a higher credit score, you’ll be able to qualify for lower interest rates on your loan.
You do not have to be a first-time homebuyer to qualify for a no-down-payment mortgage. The requirements to get a zero-down mortgage will depend on the lender and the program.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For mortgage lenders, we take into account each company’s customer service ratings, interest rates, loan product availability, minimum down payment, minimum FICO score and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
To recap, here are the picks: