Zero-down mortgages exist, but they come with real trade-offs

You can buy a home without putting money down upfront. The most common route is a VA loan if you served in the military, which requires no down payment by law. USDA loans for rural properties also require zero down. Conventional mortgages backed by Fannie Mae or Freddie Mac can go as low as 3 percent down, which is much smaller than the 20 percent many people assume is required.

The catch is real: no down payment means higher monthly payments, higher interest rates, and mandatory mortgage insurance that protects the lender if you stop paying. You will also face stricter income requirements and a longer approval process. Lenders see zero-down borrowers as higher risk, so they charge more to take that risk. Before you choose this path, understand what that costs you over 30 years.

Key Takeaways

  • VA loans (for military service members and veterans) and USDA loans (for rural areas) require zero down payment, while conventional loans typically require 3 to 5 percent.
  • Without a down payment, you will pay mortgage insurance every month for years, which adds thousands of dollars to your total cost.
  • Lenders require higher credit scores and lower debt-to-income ratios for zero-down loans, and the approval process takes longer.
  • Your monthly payment will be higher because you are borrowing the full purchase price instead of putting some of your own money in first.
  • Some down payment information programs exist through nonprofits and state housing agencies, though they vary widely by location and have income limits.

VA loans: the zero-down option for military-connected borrowers

If you served on active duty, are a veteran, or are a surviving spouse of someone who died in service, you may be able to get a VA loan through the Department of Veterans Affairs. These loans require no down payment and no mortgage insurance. The VA guarantees a portion of the loan to the lender, which is why lenders will lend the full amount without you putting money down first.

To use a VA loan, you need a Certificate of may be able to access from the VA, which you can request online through VA.gov or through your lender. The process takes a few days to a few weeks. You will still need to meet the lender's income and credit requirements, and you will pay a one-time VA funding fee (usually 2 to 3 percent of the loan amount) that can be rolled into your mortgage. This fee is lower than the mortgage insurance you would pay on a conventional zero-down loan.

VA loans have no prepayment penalty, meaning you can pay off the loan early without extra fees. They also have lower interest rates than conventional loans because the VA may provide makes them less risky for lenders. If you are military-connected, this is almost always your cheapest path to homeownership.

USDA loans for homes in rural areas

The U.S. Department of Agriculture offers mortgages with zero down payment for homes in designated rural areas. These loans are designed to help people buy homes in places where traditional lending is thin. You do not need to work in agriculture to use a USDA loan — you just need to buy in an may be able to access area.

To learn about your target property qualifies, use the USDA's property may be able to access tool on rd.usda.gov. The tool shows you whether a specific address is in an may be able to access rural area. Income limits explore: you cannot earn more than 115 percent of the median income for your county, though this varies by location. A family of four in a rural area might have a limit around $90,000 to $100,000, but this changes by county.

USDA loans require mortgage insurance, paid as an upfront fee (1 percent of the loan) and a monthly payment (0.35 percent of the loan annually). The interest rates are competitive with conventional loans. The approval process typically takes 30 to 45 days. You will need a credit score of at least 580, though 620 or higher gives you better rates.

Conventional loans with 3 to 5 percent down

If you do not may have access to for VA or USDA loans, a conventional mortgage with 3 to 5 percent down is the next option. This means if you are buying a $250,000 home, you would need $7,500 to $12,500 saved. This is much less than 20 percent, but you still need something.

Conventional loans with less than 20 percent down require private mortgage insurance (PMI), which protects the lender if you default. PMI typically costs 0.5 to 1 percent of your loan amount per year, paid as part of your monthly mortgage payment. On a $250,000 loan, that could be $100 to $200 per month. You can remove PMI once you have paid down the loan to 80 percent of the home's value, which usually takes 8 to 12 years.

Lenders offering 3 to 5 percent conventional loans typically require a credit score of 620 or higher, though 640 or higher gets you better rates. Your debt-to-income ratio (total monthly debt payments divided by gross monthly income) usually cannot exceed 43 to 50 percent. The approval process takes 30 to 45 days.

Down payment information programs in your state or city

Some states, cities, and nonprofits offer grants or forgivable loans to help first-time buyers cover a down payment. These programs vary dramatically by location — what exists in one state may not exist in another, and funding runs out. There is no single national database, so you need to check locally.

Start by contacting your city or county housing authority or your state housing finance agency. Search "[your state] down payment information" or "[your city] first-time homebuyer program." Many programs target specific income levels (often households earning less than 80 percent of the area median income) and have restrictions on the home price or location. Some require you to take a homebuyer education course first.

Nonprofits like NeighborWorks America and local community development organizations also run down payment information programs. These often have lower income limits and may offer grants that do not need to be repaid. The tradeoff is that the process process is longer and more detailed than a conventional loan. If you find a program, expect to provide tax returns, pay stubs, bank statements, and proof of homebuyer education.

What zero-down really costs you over time

Borrowing the full purchase price instead of putting money down means you pay interest on a larger amount for 30 years. On a $250,000 home, the difference between 20 percent down ($50,000) and zero down is $50,000 borrowed at your interest rate. At 7 percent interest, that extra $50,000 costs you roughly $119,000 in interest over 30 years — nearly two and a half times what you borrowed.

Add mortgage insurance to that. On a conventional zero-down loan, you might pay $150 to $200 per month in PMI for 10 years, totaling $18,000 to $24,000. A VA loan avoids this with its upfront funding fee instead. A USDA loan has both an upfront fee and ongoing insurance.

The real question is not whether zero-down is possible — it is whether waiting to save a down payment costs you more in rent than zero-down costs you in extra interest and insurance. If you are paying $1,500 per month in rent and could buy a home with a $1,400 mortgage payment (including taxes, insurance, and PMI), buying now might make sense even with zero down. If your rent is $800 and your mortgage would be $1,600, waiting to save a down payment probably makes more financial sense.

Credit score and income requirements for zero-down loans

Lenders are stricter with zero-down borrowers because they have no cushion if the home loses value or you lose income. Most require a credit score of at least 620, though many prefer 640 or higher. Your score reflects your history of paying bills on time — the higher it is, the lower your interest rate will be.

Your debt-to-income ratio matters more with zero-down loans. This is your total monthly debt payments (car loans, credit cards, student loans, the new mortgage) divided by your gross monthly income before taxes. Most lenders want this at 43 percent or lower, though some go to 50 percent for strong borrowers. If you earn $4,000 per month and already have $1,200 in debt payments, your new mortgage payment cannot exceed about $720 to stay under 43 percent.

If your credit score is below 620 or your debt-to-income ratio is too high, you have a few options: wait and pay down debt, dispute errors on your credit report, or look for a down payment information program that has looser lending requirements. Some nonprofits work with lenders who accept lower credit scores in exchange for higher interest rates.

The approval timeline and what to expect

Zero-down loans take longer to approve than conventional loans with a down payment. Lenders see them as higher risk and do more verification. Expect 30 to 45 days from process to closing, sometimes longer.

The process starts with a prequalification (a rough estimate of how much you can borrow based on income and credit) and moves to a full process. You will need to provide two months of recent pay stubs, two months of bank statements, two years of tax returns, and a list of all debts. The lender will order a credit report, verify your employment, and order an appraisal of the home.

Once the lender approves you, you move to underwriting, where a different team reviews everything again to make sure the loan meets investor guidelines. This is where most loans get delayed — underwriters ask for more documentation, clarification on gaps in employment, or explanation of large deposits. Plan for back-and-forth here. After underwriting approves, you get a clear-to-close notice, and you can schedule your closing appointment, usually 3 to 7 days later.

Frequently Asked Questions

Can I get a zero-down loan if my credit score is below 620?

Most mainstream lenders require 620 or higher. Some credit unions and nonprofits work with lenders who accept scores as low as 580, but you will pay a higher interest rate. Improving your score by paying down debt and correcting credit report errors takes time but saves you thousands in interest over 30 years.

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

You owe the full loan amount regardless of what the home is worth. If you need to sell quickly, you could owe more than the home is worth. This is why zero-down loans work best if you plan to stay in the home for at least 5 to 7 years, giving the market time to recover.

Can I use a down payment information grant and a VA loan together?

Yes. Some states allow you to layer information programs. A VA loan covers the mortgage with no down payment, and a state grant can help with closing costs instead. Check with your state housing agency about what combinations are allowed.

How do I remove mortgage insurance from a conventional zero-down loan?

You can request PMI removal once you have paid the loan down to 80 percent of the home's original purchase price. This usually takes 8 to 12 years of on-time payments. You can also refinance into a new loan once you have 20 percent equity, which removes PMI but resets your loan term.

Is a zero-down loan a bad idea?

It depends on your situation. If you are military-connected, a VA loan is usually the best option available. If you are renting and could buy a home cheaper than renting, zero-down may make sense. If you have unstable income or plan to move within a few years, waiting to save a down payment is usually smarter.