You can buy a home with no money down, but most first-time buyers put some down

The short answer: no, you do not have to put money down to buy a home. Several loan programs let first-time buyers borrow 100 percent of the purchase price. But most lenders prefer borrowers who put at least 3 to 5 percent down, and putting more down usually means you pay less interest over the life of the loan.

The reason lenders care about down payments is risk. When you put your own money into the purchase, you have more to lose if you stop paying the mortgage. A larger down payment also means you are borrowing less, so the lender's risk is smaller. That lower risk often translates to a lower interest rate for you.

Whether you need a down payment depends on which loan program you use, your credit history, your income, and the price of the home. Some paths require no down payment at all. Others ask for 3 percent. A few ask for more. The trade-off is usually between putting down less money now and paying more interest later.

Key Takeaways

  • Federal Housing Administration (FHA) loans let first-time buyers put down as little as 3.5 percent, and some state and local programs offer 0 percent down options.
  • U.S. Department of Veterans Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans both allow zero down payments for borrowers who meet their specific requirements.
  • Conventional loans typically require a minimum down payment of 3 to 5 percent, though some lenders offer 3 percent programs for first-time buyers.
  • Putting down less money means paying mortgage insurance (if your down payment is under 20 percent) and a higher interest rate, which increases your total cost over time.
  • Your credit score, debt-to-income ratio, and savings history affect whether lenders will approve you with a low or zero down payment.

Loan programs that allow zero down payment

VA loans are available to active-duty service members, veterans, and some surviving spouses. They require no down payment and no mortgage insurance. You will need a Certificate of may be able to access from the Department of Veterans Affairs, which you can request online through VA.gov or through your lender.

USDA loans are for rural and some suburban homebuyers with moderate incomes. They also require no down payment. You must meet income limits (which vary by county) and the property must be in an area the USDA designates as may be able to access. Your local USDA office or a USDA-approved lender can tell you whether your address qualifies.

State and local first-time buyer programs sometimes offer zero down payment options, though these vary widely by location. Some are run by state housing finance agencies, others by nonprofits. Your state's housing finance agency website (search "[your state] housing finance agency") lists programs available where you live.

Low down payment options for first-time buyers

FHA loans require a minimum down payment of 3.5 percent. These are designed for first-time buyers and borrowers with lower credit scores. You will pay mortgage insurance (called FHA mortgage insurance premium, or MIP) for the life of the loan, which adds to your monthly payment. FHA loans are available through any FHA-approved lender.

Conventional loans with 3 percent down are offered by many lenders specifically for first-time buyers. These require a down payment of 3 percent and mortgage insurance if you put down less than 20 percent. The mortgage insurance can be removed once you build equity in the home (usually after you owe 80 percent or less of the original purchase price). Interest rates on conventional loans are often lower than FHA rates if you have a decent credit score.

Conventional loans with 5 percent down are more common and easier to find than 3 percent options. Mortgage insurance is still required, but your monthly payment may be lower than with a 3 percent down payment because you are borrowing less.

What happens when you put down less than 20 percent

If your down payment is less than 20 percent, your lender will require mortgage insurance. This is insurance that protects the lender if you stop paying the mortgage. It does not protect you. You pay for it as part of your monthly mortgage payment.

The cost of mortgage insurance depends on your loan type, down payment amount, credit score, and loan amount. On a conventional loan, mortgage insurance typically costs 0.5 to 1.5 percent of your loan amount per year, though this varies. On an FHA loan, the cost is set by the FHA and is usually higher than conventional mortgage insurance.

You can remove mortgage insurance from a conventional loan once you have paid down the balance to 80 percent of the original purchase price. On FHA loans, mortgage insurance stays for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more on an FHA loan, you can remove it after 11 years.

How down payment size affects your total cost

A larger down payment lowers your monthly payment in two ways: you borrow less money, and you usually get a lower interest rate. Over a 30-year mortgage, even a difference of 0.5 percent in interest rate adds up to tens of thousands of dollars.

For example, on a $300,000 home, putting down 3 percent instead of 5 percent means borrowing an extra $6,000. You also pay mortgage insurance on that larger loan. The difference in your monthly payment might be $50 to $100, depending on your interest rate and credit score. Over 30 years, that is $18,000 to $36,000 in extra payments.

However, putting down the minimum does not mean you are making a mistake. If keeping cash in savings is more important to you than paying less interest, or if you expect your income to rise, a smaller down payment can make sense. The choice depends on your situation, not on what is "best" in general.

What lenders look at besides down payment

Your down payment is only one part of a lender's decision. They also look at your credit score, which reflects your history of paying bills on time. Most lenders want a score of at least 580 for FHA loans and 620 for conventional loans, though higher scores get better interest rates.

Lenders also calculate your debt-to-income ratio, which is the percentage of your monthly income that goes to debt payments. This includes your new mortgage payment, car loans, student loans, credit cards, and other debts. Most lenders want this ratio to be 43 percent or lower, though some will go higher for strong borrowers.

Your savings history matters too. Lenders want to see that you have been saving money, not just that you have money available. They typically ask for bank statements from the last two months. If you are using a gift from a family member for your down payment, most programs allow this, but you will need a letter from the gift-giver stating it does not need to be repaid.

Saving for a down payment versus buying sooner

Some first-time buyers face a choice: buy now with a small down payment, or wait and save for a larger one. There is no single right answer, but here are the trade-offs.

Buying sooner with a small down payment means you start building equity in a home instead of paying rent. However, you pay more in interest and mortgage insurance. If home prices in your area are rising quickly, buying sooner might mean a lower purchase price. If prices are stable or falling, waiting might let you buy the same home for less.

Waiting to save a larger down payment means lower monthly payments and less total interest paid. But you continue paying rent, and you miss out on any home price appreciation. The decision depends on your local market, your job stability, and how long you plan to stay in the home.

Frequently Asked Questions

Can I use a gift from family for my down payment?

Yes, most loan programs allow down payment gifts from family members. The lender will ask for a letter from the gift-giver stating the money is a gift and does not need to be repaid. Some programs require the gift-giver to be a blood relative or spouse; others are more flexible. Ask your lender about their specific rules.

What if I have bad credit but want to buy with no money down?

VA and USDA loans do not require a down payment and are more flexible with credit scores than conventional loans. FHA loans also work for lower credit scores and require only 3.5 percent down. If you do not meet the requirements for any of these, working with a credit counselor to improve your score before explore may open more options and lower your interest rate.

Does putting down more money mean I get approved faster?

A larger down payment can help your process, but it does not automatically speed up approval. Lenders still need to verify your income, check your credit, and appraise the home. The process typically takes 30 to 45 days regardless of down payment size. A larger down payment does make your process stronger if you have other weak spots, like a lower credit score.

Can I remove mortgage insurance after I pay down my loan?

On conventional loans, yes — once you owe 80 percent or less of the original purchase price, you can request to remove private mortgage insurance (PMI). On FHA loans, mortgage insurance stays for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more on an FHA loan, you can remove it after 11 years of payments.

What is the difference between a down payment and a closing cost?

Your down payment is the money you put toward the purchase price. Closing costs are separate fees for things like the appraisal, title search, attorney fees, and lender fees. Closing costs typically run 2 to 5 percent of the purchase price. You need to save for both, though some programs let you roll closing costs into your loan or ask the seller to cover them.