What loans let you skip the down payment
Three real loan types let you borrow the full purchase price with no down payment: VA loans (for military members and veterans), USDA loans (for rural properties), and FHA loans with 3.5% down (which is so close to zero that lenders often roll it into your mortgage). Each has different rules about who qualifies, what property you can buy, and what you'll pay in fees and interest.
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're also borrowing against a property you don't yet own equity in, which limits your options if the market drops or you need to sell quickly.
The path forward depends on which of these three categories you fall into. If none fit your situation, you'll need to either save a down payment or explore co-borrower options.
Key Takeaways
- VA loans require no down payment and no mortgage insurance, but only military members, veterans, and some surviving spouses may have access to.
- USDA loans cover rural properties with zero down payment for borrowers who meet income limits and have acceptable credit, but the property must be in a USDA-designated rural area.
- FHA loans require 3.5% down (often rolled into the loan), mortgage insurance for the life of the loan, and are open to most borrowers but have lower borrowing limits than conventional loans.
- All three loan types charge higher interest rates and fees than conventional loans with 20% down, so compare total costs over 15 or 30 years, not just the monthly payment.
- Your credit score, debt-to-income ratio, and employment history matter as much as the down payment—lenders still verify you can repay.
VA loans: the zero-down option for military and veterans
If you served on active duty, are currently serving, or are a surviving spouse of someone who died in service or from a service-connected disability, you may be may have access to to a VA loan. The Department of Veterans Affairs doesn't lend the money itself—banks and mortgage companies do—but the VA guarantees a portion of the loan, which means the lender takes less risk and doesn't require a down payment or mortgage insurance.
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 by mail. The process takes a few days to a few weeks. Once you have it, any lender that offers VA loans will accept it as proof you may have access to. There's no income limit, no property type restriction (though the home must be your primary residence), and no maximum loan amount in most cases, though some lenders cap based on your income and debt.
The trade-off: VA loans charge a funding fee (usually 2.3% of the loan amount for first-time users, lower if you have a service-connected disability rating), and you still need acceptable credit and a debt-to-income ratio under 50% in most cases. Interest rates are competitive with conventional loans, sometimes better.
USDA loans: zero down for rural properties
The USDA Rural Development may provide Loan Program finances homes in rural areas with no down payment required. The property must be in a USDA-designated rural area (which includes some suburbs and small towns, not just farms), and you must meet income limits that vary by county and family size—typically 115% of the area median income or less.
You explore through a USDA-approved lender, not the USDA directly. The lender checks your income, credit, and debt-to-income ratio (usually capped at 43%). If approved, the USDA guarantees the loan, so the lender doesn't require a down payment. You do pay a may provide fee (usually 1% to 3.5% of the loan, often rolled into the mortgage) and mortgage insurance annually.
USDA loans have no maximum loan amount tied to the property price, which means you can borrow the full purchase price plus closing costs. Interest rates are typically lower than FHA loans. The main limitation is geography: the property must be in an may be able to access rural area, which you can check on the USDA website using the property address.
FHA loans: 3.5% down rolled into the mortgage
FHA loans require 3.5% down, but most lenders will roll that amount into your loan balance, so you don't need to bring cash to closing. This is the most common zero-down option for borrowers who don't may have access to for VA or USDA loans. You need a credit score of at least 580 (some lenders require 620), a debt-to-income ratio under 43%, and a job history showing you've been employed for at least two years.
The cost of FHA loans is higher than conventional loans: you pay an upfront mortgage insurance premium (1.75% of the loan amount) and an annual mortgage insurance premium (0.55% to 0.80% of the loan balance per year) for the entire life of the loan if your down payment is less than 10%. This insurance protects the lender, not you, and it adds hundreds of dollars per month to your payment.
FHA loans have a maximum loan limit that varies by county (typically $420,000 to $970,000 depending on location), so they don't work for expensive properties. Interest rates are usually higher than conventional loans but competitive with USDA loans.
How lenders evaluate you without a down payment
When you have no down payment, lenders focus harder on whether you can actually repay the loan. They'll pull your credit report, verify your income through tax returns and pay stubs, and calculate your debt-to-income ratio—the percentage of your monthly gross income that goes to debt payments (mortgage, car loans, credit cards, student loans). Most lenders cap this at 43% to 50% depending on the loan type.
They'll also ask about your employment history, any gaps in work, and whether you've had late payments or collections in the past. A credit score below 620 usually disqualifies you for FHA and USDA loans; VA loans are more flexible but still require acceptable credit. Some lenders will work with you if you've had past problems but can show you've rebuilt since then.
You'll need to show proof of funds for closing costs (usually 2% to 5% of the loan amount), even though the down payment itself is covered. Some programs allow you to roll closing costs into the loan, but not all lenders offer this.
Comparing the real costs across loan types
| Loan Type | Down Payment | Mortgage Insurance | Interest Rate Range | Who Qualifies |
|---|---|---|---|---|
| VA | 0% | None | Competitive with conventional | Military, veterans, surviving spouses |
| USDA | 0% | Annual (0.35%–0.80% of balance) | Typically 0.25%–0.5% below FHA | Rural property, income limits explore |
| FHA | 3.5% (rolled in) | Upfront (1.75%) + annual (0.55%–0.80%) | Typically 0.5%–1% above conventional | Credit 580+, debt-to-income under 43% |
The monthly cost difference is substantial. On a $300,000 loan, FHA mortgage insurance alone adds $150 to $200 per month. USDA insurance adds $90 to $200 per month. VA loans have no insurance, which is why they're often the cheapest option if you may have access to. But interest rates vary by lender and market, so get quotes from at least three lenders and compare the total amount you'll pay over 30 years, not just the monthly payment.
What to do if you don't fit any of these categories
If you're not military, the property isn't rural, and you can't afford 3.5% down, you have limited options. Some lenders offer "bank statement loans" or "asset-based loans" where they look at your savings and investments instead of traditional income, but these charge higher interest rates and require substantial assets. Some employers and nonprofits offer down payment information programs, which you can search for through your city or county housing authority.
The most realistic path for most people is to save a down payment. Even 5% to 10% down significantly improves your loan terms and reduces your monthly payment. If you're close to 3.5%, an FHA loan is worth the mortgage insurance cost to get into a home now rather than waiting years to save 20%.
Another option is to find a co-borrower—a family member or partner—who can contribute to the down payment or co-sign the loan. This increases their legal obligation to repay if you don't, so it's a serious commitment on their part.
Frequently Asked Questions
Can I get a zero-down loan if I have bad credit?
VA loans are the most flexible—some lenders work with credit scores in the 500s if you can explain past problems. FHA and USDA loans typically require a minimum score of 580 to 620. If your score is lower, you may need to wait 6 to 12 months while you pay bills on time and dispute errors on your credit report before reapplying.
What if the property I want is in a city, not a rural area?
USDA loans won't work. You'd need either a VA loan (if you may have access to) or an FHA loan. Some suburbs and small towns are classified as rural by the USDA, so check the property address on the USDA website before ruling it out.
Do I have to pay mortgage insurance forever on an FHA loan?
Yes, if your down payment is less than 10%. If you put 10% down (which still requires saving something), the mortgage insurance drops off after 11 years. This is one reason why saving even a small down payment can save you money over time.
Can I use a VA loan if I'm a surviving spouse?
Yes, if your spouse died on active duty or from a service-connected disability, and you haven't remarried. You'll need a Certificate of may be able to access from the VA, which you can request by mail or online.
What happens if the home value drops after I buy with no down payment?
You'll owe more than the home is worth, which is called being underwater. You can't sell without taking a loss, and refinancing becomes difficult. This is why lenders require mortgage insurance on zero-down loans—it protects them, not you. The risk is yours.