What zero-down mortgages actually are and who offers them

A zero-down mortgage lets you borrow the full purchase price of a home without saving a down payment first. The lender finances 100 percent of the home's cost. You still pay closing costs—typically 2 to 5 percent of the loan amount—out of pocket or rolled into the loan itself, but the down payment itself is zero.

Three types of lenders offer these mortgages: the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA). Each has different rules about who can borrow and where the home must be located. Conventional lenders—banks and mortgage companies that don't use government backing—rarely offer true zero-down loans anymore, though some will go as low as 3 percent down.

The trade-off for borrowing 100 percent is that you'll pay more in interest and fees over the life of the loan. You'll also be required to carry mortgage insurance, which protects the lender if you stop paying. That insurance costs money every month or gets added to your loan balance.

Key Takeaways

  • FHA loans require a 3.5 percent down payment minimum, not zero, but are the easiest zero-down path for most buyers because the down payment can come from a gift or grant.
  • VA loans are truly zero-down if you're an may be able to access veteran, active-duty service member, or surviving spouse, and they have no mortgage insurance requirement.
  • USDA loans are zero-down for rural properties and require no mortgage insurance, but you must meet income limits and the property must be in a USDA-may be able to access area.
  • Mortgage insurance on FHA loans costs between 0.55 and 1.3 percent of the loan amount annually and stays on the loan for its full term if you put down less than 10 percent.
  • Your debt-to-income ratio—what you already owe divided by what you earn—matters more than your down payment; most lenders want this below 43 percent.

FHA loans: the most common zero-down route

FHA loans technically require 3.5 percent down, but that money doesn't have to come from your savings. It can come from a gift from a family member, a grant from a nonprofit, or a down payment information program run by your state or city. This is why FHA is often called the zero-down option—you're not required to have saved the money yourself.

To get an FHA loan, you need a credit score of at least 580 (some lenders require 620). Your debt-to-income ratio must be 43 percent or lower, meaning if you earn $4,000 a month, your total monthly debt payments—including the new mortgage—can't exceed $1,720. The home must be your primary residence, not an investment property.

FHA loans come with mortgage insurance that you pay monthly. The upfront insurance premium is 1.75 percent of the loan amount and gets added to what you borrow. The annual insurance premium ranges from 0.55 to 1.3 percent depending on your loan size and how much you put down. If you put down less than 10 percent, this insurance stays for the entire 30-year loan term.

VA loans: zero-down with no mortgage insurance

If you served in the military, a VA loan is the strongest zero-down option because there is no down payment required and no mortgage insurance. You pay a one-time funding fee instead, which ranges from 1.4 to 3.6 percent of the loan amount depending on whether you've used a VA loan before and how much you're putting down. This fee can be rolled into the loan.

To be may be able to access, you must have served on active duty for at least 90 consecutive days (or 181 days during peacetime), be currently on active duty, or be a surviving spouse of a service member who died in service or from a service-connected disability. The VA issues a Certificate of may be able to access that you bring to the lender.

VA loans have no credit score requirement set by the VA itself, though individual lenders typically require 620 or higher. There's no debt-to-income limit, though lenders may impose their own. The home must be your primary residence. You can use a VA loan more than once, and if you've paid off a previous VA loan, you can reuse your may be able to access.

USDA loans: zero-down for rural properties

USDA loans are zero-down mortgages for homes in rural areas, with no mortgage insurance requirement. Instead, you pay a may provide fee—1 percent upfront and 0.35 percent annually—that protects the lender. The upfront fee is usually rolled into the loan amount.

To may have access to, your household income must not exceed 115 percent of the median income for your county. This limit varies widely by location; in a rural county it might be $80,000, while in a more expensive area it could be $120,000. You need a credit score of 640 or higher, and your debt-to-income ratio must be 41 percent or lower (some lenders go to 43 percent with compensating factors).

The property must be in a USDA-may be able to access rural area. You can check whether a specific address qualifies on the USDA Rural Development website. The home must be your primary residence. USDA loans are assumable, meaning if you sell the home, the buyer can take over your loan at your interest rate, which can be a selling point.

What lenders look at instead of a down payment

When you have no down payment, lenders focus harder on your ability to repay. Your credit score matters—it shows whether you've paid past debts on time. Your debt-to-income ratio matters more than usual because the lender is taking on maximum risk. Your employment history and income stability matter because the lender needs to believe you'll keep earning.

Lenders also look at your savings and assets, even though you're not required to use them for a down payment. If you have money in the bank, it signals you can handle an emergency without defaulting on the mortgage. Some lenders want to see 2 to 3 months of mortgage payments saved. If you have little or no savings, you may need a stronger credit score or lower debt-to-income ratio to compensate.

Your employment history is reviewed for gaps and job changes. A two-year history in the same field is standard. If you've changed jobs recently, the lender will want to see that you moved to a similar role at similar pay. Self-employed borrowers need two years of tax returns and may face stricter scrutiny.

Down payment information programs that can help

Many states and cities run down payment information programs that give grants or low-interest loans to first-time buyers. These programs often pair with FHA loans to cover that 3.5 percent down payment. Some programs also help with closing costs.

may be able to access varies by location and program. Some are income-based, some are for first-time buyers only, and some target specific professions like teachers or healthcare workers. A few programs require you to live in the home for a set period or repay the grant if you sell within a certain timeframe.

To find programs in your area, contact your state housing finance agency or search the HUD website for local resources. Your mortgage lender can also tell you which programs they work with. Nonprofit organizations like NeighborWorks and local community development corporations often administer these programs and can walk you through the process.

The real cost of borrowing 100 percent

When you borrow the full purchase price, you pay interest on a larger balance. On a $300,000 home at 7 percent interest over 30 years, the difference between zero down and 20 percent down is roughly $60,000 in additional interest paid over the life of the loan. Your monthly payment is also higher because you're financing more.

Mortgage insurance adds another layer of cost. On an FHA loan for $300,000, the annual mortgage insurance premium could be $1,650 to $3,900 per year, depending on your loan size and down payment. That's $137 to $325 per month. On a VA loan, you avoid this, but you pay the funding fee upfront. On a USDA loan, you pay a smaller annual fee but no mortgage insurance.

You also start with negative equity—you owe more than the home is worth. If you need to sell within the first few years, you may owe more than you can sell for, especially if the market softens. This is why zero-down mortgages work best if you plan to stay in the home for at least 5 to 7 years.

Frequently Asked Questions

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

FHA loans allow credit scores as low as 580, which is considered poor. VA loans have no VA-set minimum, though lenders typically require 620. USDA loans require 640. If your score is below these thresholds, you may need to wait and rebuild credit, or look for a co-borrower with stronger credit who will be on the loan with you.

What if I don't have money for closing costs?

Closing costs can be rolled into the loan amount on FHA and USDA loans, meaning you finance them instead of paying them upfront. On VA loans, the seller can pay up to 4 percent of the purchase price toward your closing costs as a concession. Some down payment information programs also cover closing costs.

Do I have to use a specific lender for a zero-down loan?

No. FHA, VA, and USDA loans are offered by many banks, credit unions, and mortgage companies. Shop around—interest rates and fees vary significantly between lenders. A difference of 0.5 percent in interest rate costs tens of thousands over 30 years.

Can I remove mortgage insurance later?

On FHA loans with less than 10 percent down, mortgage insurance stays for the full loan term and cannot be removed. If you put down 10 percent or more, it can be removed after 11 years. On conventional loans, mortgage insurance drops off once you reach 20 percent equity. VA and USDA loans have no mortgage insurance to remove.

What happens if the home value drops after I buy?

You're responsible for the full loan amount regardless of the home's value. If you owe $300,000 and the home is worth $250,000, you still owe $300,000. This is why zero-down loans carry more risk—you have no equity cushion. However, you can't be forced to sell; as long as you keep paying, you keep the home.