Yes, but they come with real trade-offs you need to understand

Zero-down mortgages exist, but they are not common and they are not free. The lender does not forgive the down payment — they shift the cost to you in a different form. You either pay a higher interest rate for the life of the loan, accept mortgage insurance that adds to your monthly payment, or both. The most common zero-down options are VA loans (for military members and veterans), USDA loans (for rural properties), and some conventional loans with lender-paid mortgage insurance.

The reason down payments exist is straightforward: they reduce the lender's risk. If you put down 20 percent and the house value drops, the lender still has a cushion. With zero down, the lender has no cushion. They compensate by charging you more, either upfront or monthly, for the entire loan term. Understanding which form that cost takes matters because it changes how much you actually pay.

Key Takeaways

  • VA loans and USDA loans genuinely require no down payment and no mortgage insurance, but VA loans are only for military-connected borrowers and USDA loans only for rural properties.
  • Conventional zero-down mortgages exist but usually require lender-paid mortgage insurance, which raises your interest rate by 0.25 to 0.75 percentage points for the entire loan.
  • FHA loans allow 3.5 percent down (not zero), but the mortgage insurance is mandatory and stays on your loan for the full 30 years if you put down less than 10 percent.
  • The monthly cost of zero-down financing is often higher than putting down 10 or 15 percent and paying a slightly lower rate, so comparing the total payment matters more than the down payment amount.

VA loans: zero down if you have military service

A VA loan is a mortgage backed by the Department of Veterans Affairs. It requires no down payment and no mortgage insurance. The trade-off is that you pay a funding fee — a one-time charge rolled into the loan amount, usually 1.4 to 3.6 percent of the loan amount depending on your service history and whether you have used a VA loan before. A veteran borrowing $300,000 might pay a $4,200 to $10,800 funding fee.

You must be a current or former member of the military, National Guard, or Reserves, or the surviving spouse of someone who died in service or from a service-connected condition. The VA issues a Certificate of may be able to access that you provide to the lender. The process to request one takes a few days to a few weeks through the VA website or by mail.

VA loans have no prepayment penalty, meaning you can pay off the loan early without a fee. The interest rate is typically lower than a conventional loan because the VA may provide reduces the lender's risk. For borrowers who meet the requirement, this is the cheapest zero-down option available.

USDA loans: zero down for rural and some suburban properties

A USDA loan is a mortgage backed by the U.S. Department of Agriculture's Rural Development program. It requires no down payment and no mortgage insurance. Like VA loans, you pay a one-time may provide fee — usually 1 to 2 percent of the loan amount — rolled into the loan. A $300,000 USDA loan carries a $3,000 to $6,000 may provide fee.

The property must be in a USDA-may be able to access area. This includes most rural counties, but also some suburban areas on the edge of cities. You can check whether a specific address qualifies on the USDA's website by entering the zip code. Income limits explore — you cannot earn more than 115 percent of the median income for your county, though this varies by location and family size.

USDA loans have no prepayment penalty. The interest rate is competitive with conventional loans. The main limitation is the property location requirement, which eliminates most urban and many suburban properties.

Conventional loans with lender-paid mortgage insurance

Some lenders offer conventional mortgages with zero down and no borrower-paid mortgage insurance. Instead, the lender pays the mortgage insurance premium upfront and recoups it by charging you a higher interest rate. This is called lender-paid mortgage insurance or LPMI.

The rate increase is typically 0.25 to 0.75 percentage points above what you would pay with a 20 percent down payment. On a $300,000 loan at 7 percent, that 0.5 percentage point increase costs you roughly $125 more per month for 30 years — about $45,000 in total interest. You do not see a separate insurance bill, but you are paying for it every month in the form of a higher rate.

The advantage is simplicity: one monthly payment, no insurance premium that drops off later. The disadvantage is that you pay the higher rate for the entire loan, even after you have built equity. If you plan to stay in the home for 10+ years, this cost adds up quickly.

FHA loans: 3.5 percent down, not zero

FHA loans are often mentioned in zero-down conversations, but they are not zero-down. The minimum down payment is 3.5 percent. On a $300,000 home, that is $10,500 out of pocket.

FHA loans require mortgage insurance in two forms: an upfront premium (1.75 percent of the loan amount, usually rolled into the loan) and an annual premium (0.55 to 0.8 percent of the loan balance per year, added to your monthly payment). The annual insurance stays on the loan for the full 30 years if you put down less than 10 percent. This makes FHA loans more expensive over time than conventional loans with 10 or 15 percent down.

FHA loans are easier to get than conventional loans if your credit score is below 620 or your debt-to-income ratio is high. But the insurance cost is real and permanent, so comparing the total monthly payment to other options matters.

How the real cost compares across options

The down payment amount is not the only number that matters. A zero-down loan with a 0.5 percentage point rate increase can cost more monthly than a 15-percent-down loan at a lower rate. Here is what changes the calculation:

  • The interest rate you may have access to for (depends on credit score, debt-to-income ratio, and loan type)
  • The mortgage insurance cost, if any, and how long it stays on the loan
  • How long you plan to stay in the home
  • Whether you have cash available without depleting your emergency savings

A mortgage calculator that lets you adjust the down payment and see the total monthly payment is more useful than a rule of thumb. Most lenders provide one on their website. The real comparison is: what is my monthly payment and total interest paid under each scenario?

When zero down makes sense and when it does not

Zero down is worth considering if you are a VA borrower or USDA-may be able to access and the property qualifies. The funding or may provide fee is real, but the lack of mortgage insurance and the competitive rates make these loans genuinely affordable.

Zero down with lender-paid mortgage insurance makes sense if you have limited cash, plan to stay in the home for fewer than 7 to 10 years, and the rate increase is small (0.25 to 0.5 percentage points). If you plan to stay longer, putting down 10 or 15 percent and paying a lower rate usually costs less over time.

Zero down does not make sense if you have savings available and your credit score qualifies you for a good rate. The higher rate or insurance cost will outweigh the benefit of keeping cash on hand. A 15 percent down payment with a 0.5 percentage point lower rate almost always beats zero down with a higher rate, unless you need the cash for something else.

Frequently Asked Questions

Can I get a zero-down mortgage if I do not have a VA loan or USDA property?

Yes, through conventional loans with lender-paid mortgage insurance, but you pay a higher interest rate for the entire loan term. The rate increase typically costs $100 to $300 more per month than a 20 percent down payment would. Some lenders offer this option; others do not, so you need to ask.

What if I put down 5 percent instead of zero?

With 5 percent down on a conventional loan, you pay borrower-paid mortgage insurance (PMI), which you can remove once you reach 20 percent equity. The monthly PMI cost is usually lower than the rate increase from lender-paid insurance, making 5 percent down cheaper than zero down in most cases.

Do I have to use the down payment money I have saved?

No. If you have savings but prefer to keep cash for emergencies or other expenses, zero down is a valid choice. The question is whether the cost of zero down (higher rate or insurance) is worth the benefit of keeping that cash. Run the numbers for your situation.

Can I get a zero-down mortgage with bad credit?

VA and USDA loans do not have strict credit score minimums, though most lenders want 580 or higher. Conventional zero-down loans typically require a score of 620 or above. FHA loans are more flexible with credit but require 3.5 percent down. If your score is very low, an FHA loan or waiting to improve your score may be your only options.

What happens if the house value drops after I buy with zero down?

You are underwater on the loan — you owe more than the house is worth. This does not force you to do anything, but it limits your options if you need to sell or refinance. With a down payment, you have equity that protects you from this situation. This is why lenders charge more for zero-down loans.