How Much Home Can I Afford with a 0% Down Payment?
Buying a home is a major milestone, but saving up for a large down payment can be tough. Luckily, there are mortgage programs that let you buy a home with 0% down—making homeownership accessible even without big savings.
Whether you’re a veteran, live in a rural area, or want low down payment alternatives, knowing your options is key. This guide covers zero-down-payment mortgages and steps you can take towards getting pre-approved.
Ready to explore your options? Check out Rate’s tailored loan programs and get pre-approved through our Same Day Mortgage pre-approval today!
What is a Zero-Down Mortgage?
A zero-down mortgage lets you buy a home without an upfront down payment, but it doesn’t mean you won’t pay any fees—those are often rolled into the loan.
While a no down payment mortgage may be enticing and a great offer for some, it’s important to consider what a zero down mortgage really means and decide if it will fit your unique financial situation.
Can I Get a Mortgage with Zero Down Payment?
Yes, you can! Several mortgage programs are designed to help eligible borrowers purchase a home without the need for a down payment.
These programs, like VA loans and USDA loans, are aimed at specific groups of people—such as veterans and those living in rural or suburban areas.
If you qualify, a zero-down-payment mortgage can make owning a home more achievable, allowing you to avoid the financial hurdle of saving for a large down payment.
A zero-down mortgage works by enabling you to finance 100% of the home’s purchase price, eliminating the need for an upfront payment. However, you’ll need to meet specific eligibility criteria, which we’ll cover in more detail.
What Are My Options for a Zero Down Payment Home Loan?
There are a few mortgage loan options that allow borrowers to buy a home with no down payment. The most popular zero-down-payment mortgages are VA loans and USDA loans.
These types of loan programs are designed to help specific groups of people, such as veterans and those living in rural areas, achieve homeownership without the upfront down payment requirement. Here’s how these mortgage options work:
VA Loans
VA loans are an excellent mortgage option for service members, veterans, and eligible surviving spouses who want to buy a home with no money down.
This type of loan is guaranteed by the U.S. Department of Veterans Affairs, making it easier for lenders to offer zero-down-payment mortgages to qualifying individuals.
Eligibility Requirements for VA Loans
To qualify for a VA loan, you must meet certain eligibility criteria. Typically, you need to be an active-duty service member, veteran, or a qualifying member of the National Guard or Reserves.
You'll also need to obtain a Certificate of Eligibility (COE) from the VA.
Benefits of Using a VA Loan
The biggest benefit of VA loans is that there’s no down payment required. Additionally, VA loans don’t require private mortgage insurance (PMI), which can significantly lower your monthly payments.
Borrowers can also take advantage of competitive mortgage rates, making homeownership even more affordable.
How to Apply for a VA Loan
To apply for a VA loan, you’ll need to gather your COE and provide financial documents, such as proof of income and your credit score history.
A qualified mortgage lender like Rate, who has helped over 57,000 veterans get into a home, can help you through the application process and answer any questions you may have.
USDA Loans
Another no-down-payment mortgage option is a USDA loan, which is backed by the U.S. Department of Agriculture. These loans are designed to help low- and moderate-income families buy homes in rural or suburban areas.
Who Qualifies for a USDA Loan?
To qualify for a USDA loan, you must meet specific income limits and purchase a property in an eligible rural area. Your lender will check your eligibility based on the property’s location and your household income.
Property Requirements for USDA Loans
USDA loans are only available for single-family homes that serve as the buyer’s primary residence. The property must be in a designated rural area, which is defined by the U.S. Department of Agriculture.
Advantages of USDA Loans
Like VA loans, USDA loans do not require a down payment. They also offer low interest rates and lower mortgage insurance premiums compared to conventional loans.
Can I Get a Conventional Mortgage with Zero Down Payment?
While conventional mortgages typically require some form of down payment, there are low down payment alternatives that could be suitable if you don’t qualify for a VA or USDA loan.
Some conventional loan programs only require a minimum down payment of 3% or 5%. These options are perfect for borrowers who don’t have a large amount of savings but want to step into homeownership.
Low Down Payment Alternatives
Programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are designed for low-income and first-time homebuyers.
These mortgage programs allow for down payments as low as 3%, making them a viable alternative to no-down-payment mortgages. Even if you can only afford a small percentage of the home’s purchase price, these programs can help bridge the gap.
Can You Put 0% down on an FHA Loan?
Although you cannot put 0 down on an FHA loan, the Federal Housing Administration (FHA), state agencies, or even credit unions can help American families come up with the funds needed for a minimum down payment.
The Federal Housing Administration requires a minimum down payment of 3.5% of the home’s purchase price for borrowers with a credit score of 580 or higher.
Additionally, FHA loans in some states, like California and New York, have their own programs to assist eligible borrowers with the upfront costs.
Pros and Cons of Low Down Payment Mortgages
Like any mortgage option, low down payment loans come with both advantages and disadvantages to consider before making a decision.
Pros
- Allows you to purchase a home sooner without needing a large upfront payment
- More lenient credit score requirements compared to conventional loan options
- The savings from not making a large down payment can be used for closing costs or placed in savings accounts for future expenses
- Often, these loans are designed to help first-time buyers with low down payment loans and flexible terms
Cons
- May require private mortgage insurance (PMI) or mortgage insurance premium (MIP), increasing your monthly payments
- Potentially higher interest rates, leading to increased overall costs
- You could be responsible for a funding fee, adding to the total expenses
How to Qualify for Low Down Payment Mortgages
To qualify, you’ll need to meet credit score requirements and demonstrate your ability to make monthly payments. The qualification process for low down payment mortgages is generally more flexible compared to standard conventional loans.
Some programs are designed for buyers with median income levels, so it’s worth checking eligibility criteria for your location.
If you’re looking to buy a home with a down payment that’s less than 20%, consider working with a lender who’s NMLS certified and can guide you through the requirements.
What credit score do I need to buy a house with no money down?
To buy a house with no money down, you typically need a credit score of at least 620 for a USDA loan or a minimum credit score of 500, for some lenders, for VA loans.
As mentioned before these loans offer 100% financing, but eligibility depends on a few factors like your location or military status, and a stronger credit can improve your approval chances.
Are there income limits for zero-down home loans?
Yes, some zero-down home loans have income limits. For USDA loans, your household income must fall below a certain threshold based on your location.
VA loans, however, don’t have income limits but are only available to qualified veterans, active-duty service members, and their families.
How to Compare Zero-Down Mortgage Lenders
Here are a few factors to consider when evaluating zero-down mortgage lenders:
Compare Interest Rates and Loan Terms
Interest rates will have a big impact on how much you pay over time. Even a slight difference can increase monthly payments. Look for lenders, like Rate, offering competitive rates and be sure to review the loan terms carefully.
Evaluate Fees and Closing Costs
Fees are part of any mortgage, but they vary between lenders. Ask each lender for a detailed breakdown of fees like origination and closing costs.
Some lenders may let you roll fees into the loan, but this will increase your monthly payments, so weigh that option carefully.
Consider Customer Support and Guidance
Having a lender who provides solid customer support can make the homebuying process much easier. Look for a lender that is responsive and transparent, giving clear answers to your questions.
For example, lenders like Rate have gained a reputation for offering personalized support, helping first-time homeowners feel confident in their decisions.
Check Eligibility Requirements
Each lender has specific eligibility criteria, such as credit scores and debt-to-income ratios. Choose a lender that fits your financial situation and can support your needs, whether you’re buying a home or planning to refinance later.
Review Reputation and Customer Feedback
Lastly, research lender reviews from previous customers. A lender’s reputation can tell you a lot about how they treat borrowers and the ease of the mortgage process.
Positive reviews from homeowners and strong track records can give you peace of mind as you make your choice.
How Can I Get Pre-Approved for a Home Loan?
Getting pre-approved for a home loan is a crucial step in the homebuying process. It shows sellers and real estate agents that you’re a serious buyer and have the financial backing to support your offer.
Here’s how you can get pre-approved:
Documents You Need for Pre-Approval
To get pre-approved, you’ll need to provide documents like proof of income, tax returns, credit score history, and details of any existing debts. Lenders will review this information to determine the maximum loan amount you qualify for.
You’ll also need to provide your savings accounts statements to demonstrate you have enough funds to cover closing costs and any upfront payments required by the lender.
Additionally, ensure that your credit cards are in good standing, as any outstanding balances can impact your pre-approval.
If you’re considering an FHA loan or another Federal Housing Administration-backed mortgage, you’ll need to meet specific criteria set by the HUD. This can include proving that the home will serve as your primary residence.
Steps to Get Pre-Approved Quickly
Gather your documents in advance to speed up the process. Make sure your credit score is in good shape, as this will play a significant role in the lender’s decision.
If you have home equity from a second mortgage or are considering refinancing your current property, ensure these details are included in your application.
If you’re part of a credit union, ask about pre-approval processes that may have lower costs or faster turnaround times. You can also explore down payment assistance programs to see if they offer special benefits when applying for pre-approval.
Understanding Your Pre-Approval Letter
A pre-approval letter will outline the loan amount you qualify for and any conditions that need to be met before closing. Having this letter in hand can give you a competitive edge when making offers on properties.
The letter can also provide insights into the loan options available to you, whether it’s a rate mortgage or adjustable mortgage. It’s essential to understand every detail, as it could impact your final purchase price.
With the pre-approval, you’ll be better prepared to navigate the housing market and negotiate confidently.
Make sure to review the loan’s terms, as you might find opportunities for refinancing in the future to get a lower interest rate or remove PMI if your home’s value increases.
Start Living Your Homeownership Dream—Get Same Day Pre-approval Today!
Finding a home loan with zero down payment can make all the difference for borrowers looking to achieve homeownership.
VA loans and USDA loans are the primary options for no-down-payment mortgages, while low down payment alternatives like HomeReady and Home Possible make buying a home more accessible.
Ready to make the move? Start by applying for a pre-approval and see how Rate can help you secure your financing with ease and confidence.
*Rate, Inc.’s Same Day Mortgage promotion offers qualified customers who provide certain required financial information/documentation within 24 hours of locking a rate on a mortgage loan the opportunity to receive a loan approval within 1 business day of timely submission of documentation and does not suggest that the borrower will receive funding on the same day as their application submission. Rate, Inc. cannot guarantee that a loan will be approved or that a closing will occur within a specific timeframe. Applicant subject to credit and underwriting approval. Restrictions apply. Visit Rate.com/same-day-mortgage for terms and conditions.
Guaranteed Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture, or any other government agency.