No down payment mortgages do exist, but they are not common and come with real trade-offs

You can get a mortgage without putting money down, but the lender will charge you more for it — either through a higher interest rate, mortgage insurance, or both. The most common no-down-payment path is a VA loan if you are a veteran or active-duty service member. The second is an USDA loan if you are buying in a rural area and meet income limits. A third option is a conventional mortgage with lender-paid mortgage insurance, where the bank covers the insurance cost but raises your rate to recoup it. FHA loans require 3.5 percent down, not zero, so they are not truly no-down-payment but are the lowest threshold most borrowers can access.

The catch is that lenders do not absorb the risk of a zero-down loan for free. When you put nothing down, you owe the full purchase price from day one, and the lender's cushion if you default is gone. That risk gets priced into your loan one way or another.

Key Takeaways

  • VA loans and USDA loans are the only true zero-down mortgages widely available, each with specific may be able to access requirements tied to military service or rural location and income.
  • Conventional mortgages with lender-paid mortgage insurance let you avoid a down payment, but the lender raises your interest rate to cover the insurance cost, making your monthly payment higher for the life of the loan.
  • FHA loans require 3.5 percent down, not zero, and charge mortgage insurance that stays on the loan until you reach 20 percent equity or refinance.
  • No-down-payment mortgages almost always result in a higher total cost over the life of the loan compared to putting money down, even when the interest rate appears competitive.

VA loans: zero down if you have military service

A VA loan is backed by the U.S. Department of Veterans Affairs and requires no down payment if you meet the service requirement. You must be a veteran, active-duty service member, National Guard member, or surviving spouse of someone who died in service or from a service-connected disability. The VA does not make the loan — a bank or mortgage lender does — but the VA guarantees a portion of it, which is why the lender will lend without a down payment.

To use a VA loan, you need a Certificate of may be able to access, which you request from the VA. The process takes a few days to a few weeks online or by mail. Once you have it, you give it to your lender, who will verify it and proceed. There is no mortgage insurance on a VA loan, which is a major advantage over other zero-down options. You do pay a VA funding fee — typically 2.3 percent of the loan amount for first-time users — but this is a one-time cost, not an ongoing insurance premium.

VA loans have no income limit and no maximum loan amount in most cases, though some lenders set their own caps. The interest rate is usually competitive with or better than conventional mortgages because the VA may provide reduces the lender's risk.

USDA loans: zero down in rural areas with income limits

A USDA loan is backed by the U.S. Department of Agriculture and requires no down payment if you are buying in a designated rural area and your household income is at or below 115 percent of the area median income. The USDA defines rural broadly — it includes small towns and some areas on the edges of suburbs — so the may be able to access geography is larger than many people expect. You can check whether a specific address qualifies on the USDA website.

Like a VA loan, a USDA loan is made by a bank or lender but may provide by the government. You do not pay mortgage insurance in the traditional sense. Instead, you pay a may provide fee upfront (typically 1 percent of the loan amount) and an annual annual fee (usually 0.35 percent of the remaining balance). These fees are lower than FHA mortgage insurance but higher than a VA funding fee.

USDA loans have no maximum loan amount and competitive interest rates. The main limitation is the income cap and the rural location requirement. If your income exceeds the limit or you are buying in an urban or suburban area, you cannot use a USDA loan.

Conventional mortgages with lender-paid mortgage insurance

If you do not may have access to for a VA or USDA loan, you can get a conventional mortgage with zero down by accepting lender-paid mortgage insurance (LPMI). In this structure, the lender pays the mortgage insurance premium upfront but raises your interest rate to cover the cost. You never write a separate check for insurance, but you pay for it every month through the higher rate.

The advantage is simplicity: no separate insurance payment to track. The disadvantage is that you pay the insurance cost for the entire life of the loan, even after you build equity. With a traditional mortgage where you pay the insurance yourself, the insurance drops off once you reach 20 percent equity. With LPMI, it does not. Over a 30-year loan, this can add tens of thousands of dollars to your total cost.

Lenders offering LPMI typically raise your rate by 0.25 to 0.75 percentage points depending on your credit score and the loan amount. On a $300,000 loan at a base rate of 6.5 percent, a 0.5 percent rate increase costs roughly $150 more per month. Over 30 years, that is $54,000 in additional interest.

FHA loans: the lowest down payment, not zero

An FHA loan requires a minimum 3.5 percent down payment, so it is not truly zero-down, but it is the lowest threshold most borrowers can access if they do not may have access to for VA or USDA loans. On a $300,000 home, 3.5 percent is $10,500. FHA loans are insured by the Federal Housing Administration, which means the government covers the lender's loss if you default.

Because the loan is insured, you pay mortgage insurance in two parts: 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 remaining balance, depending on the loan amount and term). The annual insurance stays on the loan for the full 30 years if you put down less than 10 percent, or until you reach 20 percent equity if you put down 10 percent or more.

FHA loans have looser credit and income requirements than conventional mortgages, which is why they are popular with first-time buyers. However, the mortgage insurance cost is substantial and adds significantly to your monthly payment and total loan cost.

How no-down-payment mortgages affect your monthly payment and total cost

When you put zero down, your monthly payment is higher than it would be with a down payment, and the total cost of the loan over 30 years is substantially higher. The difference comes from two sources: you are borrowing more money (the full purchase price instead of the purchase price minus your down payment), and you are paying insurance or a higher interest rate to cover the lender's risk.

Consider a $300,000 home. With 20 percent down ($60,000), you borrow $240,000. With zero down, you borrow $300,000. That extra $60,000 in principal alone adds roughly $360 per month to your payment at a 6 percent rate. Add mortgage insurance or a rate increase, and the monthly difference grows to $500 or more.

Over 30 years, a zero-down mortgage on that home could cost $150,000 to $200,000 more than a mortgage with 20 percent down, depending on the insurance structure and interest rate. That is real money, and it is worth understanding before you commit to a zero-down loan.

When a no-down-payment mortgage makes sense

A zero-down mortgage is worth considering if you do not have savings for a down payment and you cannot wait to buy. If you are a veteran or buying in a rural area with a may have access to income, VA and USDA loans are strong options because they have no mortgage insurance (VA) or low insurance costs (USDA) and competitive rates. The trade-off is acceptable because the government may provide keeps costs down.

A conventional mortgage with lender-paid insurance or an FHA loan makes less sense if you have any ability to save a down payment, even 5 or 10 percent. The insurance cost over 30 years is steep, and you would be better off delaying the purchase and building savings. However, if you are in a strong financial position otherwise — stable income, good credit, low debt — and you are certain you will stay in the home for at least seven to ten years, the higher cost might be worth it to you to buy now rather than wait.

The worst scenario is taking a zero-down mortgage when you are financially stretched. If your income is tight, your emergency fund is small, or your job is unstable, the higher monthly payment leaves you vulnerable to default if something goes wrong.

Frequently Asked Questions

Do I need perfect credit to get a no-down-payment mortgage?

No. VA loans typically require a credit score of 580 or higher, though some lenders set the bar at 620. USDA loans have similar minimums. FHA loans accept scores as low as 500 in some cases, though 580 is more common. Conventional mortgages with lender-paid insurance usually require 620 or higher. Your score affects the interest rate you receive, not whether you can borrow.

Can I use a no-down-payment mortgage to buy an investment property?

VA and USDA loans are for primary residences only — the home you will live in. Conventional mortgages with lender-paid insurance can sometimes be used for investment properties, but the rates and terms are less favorable, and many lenders require at least 15 to 20 percent down for rentals. Check with your lender about their specific rules.

What happens if I want to refinance a no-down-payment mortgage later?

You can refinance at any time, but you will need to have built equity or have the home value increase to make it worthwhile. If you refinance into a conventional loan, most lenders require at least 20 percent equity to avoid mortgage insurance. With a VA loan, you can refinance into another VA loan at any time. USDA loans can be refinanced into conventional or other USDA loans.

Is it better to put down 3.5 percent on an FHA loan or zero percent on a conventional loan with lender-paid insurance?

It depends on the rates offered. FHA insurance is typically cheaper than the rate increase for lender-paid insurance, so an FHA loan with 3.5 percent down usually costs less over time. However, if you can scrape together even 5 to 10 percent, a conventional mortgage with that down payment will cost significantly less than either option.