How to Buy a House With No Money Down

Saving for a down payment is often the biggest roadblock for first-time home buyers. The good news is, you don’t need to put down 20% to buy a home.

In fact, you may be able to buy a house with no money down if you served in the military, are a rural home buyer, are a member of a credit union or qualify for 100% financing through certain mortgage lenders. Down payment assistance programs can also make it possible to buy a house with very little money out of pocket.

Find out more about no-down-payment mortgages and whether they’re right for your situation.

» MORE: Best lenders for no- and low-down-payment mortgages

No-down-payment mortgage options

There are two government-backed loans that allow you to buy a home with no down payment.

VA loans

If you or your spouse are a qualifying current service member or veteran, you may be eligible for a VA loan guaranteed by the Department of Veterans Affairs.

What to expect: VA loans require no minimum down payment or private mortgage insurance, but you do have to pay a funding fee, which covers the cost of foreclosure in case you default on the loan.

While the VA doesn’t set a minimum credit score or income requirement, lenders do. The property also has to be your primary residence and meet the VA’s minimum safety standards.

» MORE: Best VA mortgage lenders

USDA loans

USDA loans are zero-down mortgages backed by the U.S. Department of Agriculture for low- and moderate-income home buyers in eligible rural areas.

What to expect: While USDA loans don’t technically require mortgage insurance, you are required to pay a guarantee fee, which protects the lender in the event of foreclosure.

The USDA doesn’t have a minimum credit score requirement, but lenders often require a score of at least 640.

» MORE: Best USDA mortgage lenders

Physician loans

If you are a medical professional, you may qualify for a physician loan with no down payment.

What to expect: Physician loans don't require private mortgage insurance, and typically have flexible proof of employment requirements and accommodate higher debt-to-income ratios because of the large amount of medical school debt the borrower may have.

Other 100% mortgages

Government loans aren’t the only game in town when it comes to no-down-payment home loans.

Some, but not all, lenders offer their own 100% mortgage financing. These loans aren’t common because of the risk involved for lenders; they can lose a lot of money if you default on the mortgage and end up in foreclosure.

What to expect: Depending on the mortgage lender, they may require that the loan is for your primary home, that you live in a certain area or that you have an excellent credit score. If your mortgage lender is a credit union, you’ll need to be a member.

» MORE: Best credit union mortgage lenders

Pros and cons of no-down-payment home loans

While you may feel like you won the lottery with a no-down-payment loan, there are advantages and disadvantages:

PROS

• You don't have to save up as much money.

• You can become a homeowner sooner.

• You'll have more cash in your pocket for upgrades or expenses.

CONS

• You'll have little or no equity in your home for the first few years of homeownership.

• You may have to pay mortgage insurance premiums and higher monthly mortgage payments, interest rates or fees.

• You may still have to bring some money to the table to pay closing costs or make an earnest money deposit.