Can You Buy a Home with No Down Payment?

If you have ever looked at home prices and thought, “How will I ever save up enough money for the down payment?”, you are not alone. For many first-time buyers, younger buyers, and families with limited savings, the down payment is the biggest hurdle people face when it comes to renting versus owning.

A down payment is the part of your home’s price that you pay up front, in cash, at closing. The rest of the price is covered by your mortgage, which you pay back over time.

But here’s the good news. You might not need to save up for as much as you think. In some cases, you may be able to buy a home with no down payment at all. It may sound too good to be true, but it’s actually possible through certain government-backed loans, like VA or USDA loans and some no-down-payment mortgage programs.

Keep reading to learn about potential low or no down payment options to find a path to homeownership that fits your budget and keeps more money in your pocket.

What is a Down Payment?

Your down payment is a key part of how your loan is structured. Your down payment represents your initial investment in your home.

A down payment is:

• Money paid from your own funds, eligible gifts, grants, and down payment assistance

• One of the ways you can build equity instantly in your home

• NOT a part of your closing costs

Before we dive into mortgage options that don’t have a down payment, it helps to understand what your down payment actually changes. In simple terms, the size of your down payment affects how much you borrow and what your monthly payment actually looks like.

Putting down a larger down payment can:

• Lower your loan amount

• Reduce your monthly mortgage payment

• Sometimes help you get better loan terms

• On some conventional loans, help you avoid private mortgage insurance (PMI)

Putting down a smaller down payment can:

• Get you into a home sooner

• Require less cash saved before you buy

Make homeownership feel more realistic, even if you are early in your career

What Does Your Down Payment Not Cover?

Even when you qualify for a 0% down loan, that does not mean you walk into your new home without paying anything. As you were reading, you might have noticed a particular pattern.

Here is what zero down does not cover:

• Closing costs

• Mortgage insurance and program fees

• Monthly payment

• Home inspections

• Moving costs

• Home upgrades/renovations

Can You Buy a Home with No Down Payment?

Yes, but not everyone will qualify. Some loan programs are designed specifically to allow 0% down when certain requirements ae met.

The main options are:

• VA Loans

• USDA Loans

• No Down Payment Mortgages

How VA Loans Make Zero Down Payment Possible

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs, and eligible borrowers can buy a home with zero down payment.

They have several powerful benefits that help buyers with affordability:

• No down payment: Qualified borrowers can finance up to 100% of the home’s purchase price. No down payment required.

• No monthly mortgage insurance: VA loans do not require private mortgage insurance (PMI), no matter how little you put down. This can save you a significant amount every month.

• Competitive interest rates: Because the VA guarantees a portion of the loan, lenders often offer better rates than some other loan types. 

• Flexible qualifying guidelines: VA loans generally allow more flexible credit and debt-to-income standards than many conventional loans. 

VA loan qualifications are:

• A veteran who meets minimum service requirements

• An active-duty service member with at least 90 continuous days of service

• A current or former National Guard or Reserve member with enough qualifying service

• A surviving spouse who meets VA guidelines

It is important to note that those who qualify must also meet VA and lender standards for credit, income, and other necessary requirements. Eligible buyers must also live in the home they are buying as their primary residence.

It sounds like a sweet deal, but there are always important trade-offs to consider. Most borrowers who use a VA loan must pay a one-time VA funding fee, closing costs, and interest on the loan. The fee is charged as a percentage of the loan amount and can often be rolled into the loan instead of being paid in cash. Some veterans, such as those receiving VA disability compensation, may pay no funding fee at all.

Do USDA Loans Offer No Down Payment?

The U.S. Department of Agriculture (USDA) loan program helps eligible individuals and families purchase or build with no money down, but only in eligible rural areas.

USDA qualifications include:

• Income limits based on local area median income

• Homes must be located in eligible rural or certain suburban areas

• Fixed-rate terms

USDA loans can be a good option with $0 down, but they are not for everyone.

Here’s why:

• Not all areas qualify as rural, so many city properties will not be eligible

• Borrowers must meet income limits, which vary by location and household size

• Still comes with closing costs and other fees

Common Low Down Payment Options

If you do not qualify for zero-down loan programs, you still have good options. Many buyers purchase homes every year with low down payments.

For a long time, people believed you needed 20% down to buy a home. But, that is old news and no longer the standard. Many loan programs allow a smaller percentage for the down payment, like:

• Conventional loans: minimum around 3% down

• FHA loans: minimum around 3.5% down

Along with VA and USDA loans, these options also give today’s buyers more paths to achieving homeownership.

How Down Payment Assistance Works

Even a 3% or 3.5% down payment plus closing costs can feel like a lot. That is where down payment assistance (DPA) comes in.

Down payment assistance programs are usually run by state and local governments using a mix of federal, state, and local funds. Their goal is to help low- and moderate-income households who are ready for homeownership but do not have enough saved for a down payment.

Down payment assistance can be seen as: 

• Grants: Funds you do not repay.

• Forgivable loans: Second mortgages that are forgiven over time as long as you stay in the home.

• Deferred or “silent” second mortgages: Loans with no monthly payments that are repaid later, often when you sell or refinance.

These programs can cover:

• Part of your down payment

• Part or all your closing costs

That can reduce the amount of cash you need up front by thousands of dollars, which may mean the difference between buying this year and waiting.

How to Find Programs That Fit You

With so many options like zero-down loans, low-down payment loans, and assistance programs, it may feel hard to even know where to look.

You can explore:

• State housing agencies

• Local housing departments

• National resources that list government-backed home loans and assistance

• Talk to a local lender

These resources can point you toward programs and assistance options with better guidelines and clear insight into their requirements for your situation and the community where you plan to buy.

For that reason, working with a First Heritage Mortgage loan officer makes a big difference. Instead of sorting through all of this information on your own, a loan officer can help you match programs that actually fit your budget, eligibility, and the area where you want to live so you can move forward with a clear plan.

Frequently Asked Questions (FAQ)

Affording a down payment is one of the biggest worries buyers face today, but it’s not the only path to homeownership. Whether you qualify for a zero-down option loan or you need help exploring low down payment and assistance programs, you don’t have to figure it out alone.

Our loan officers at First Heritage Mortgage can walk you through your options and build a plan that fits your budget. Get started today!