How to Buy a House With No Money Down

Written by Steven PorrelloSeptember 19th, 20225 minute read

Low and no down payment mortgages | Try a down payment assistance program | Other ways to pay no money down | Pros and cons of a zero down payment loan | FAQs

Most lenders recommend making a 20% down payment to buy a house. For the median sales price in 2022 — around $440,000 — you need a down payment of $88,000.[1] Not exactly small potatoes.

Fortunately, you don’t need a 20% down payment to buy a house. If you're eligible for a loan from the FHA, USDA, or VA, you can get a mortgage with as little as a 0–3.5% down payment. The requirements for these mortgages are low and typically include:

  • A credit score above 580
  • A debt-to-income ratio of 43% or lower
  • An earnest money deposit of 1% to 2%

If these loan options sound good to you, now might be the time to connect with an agent. A good agent will help you find the best mortgage for your situation, as well as navigate you through the application process.

» SAVE: Find your agent through Clever Real Estate, get cash back savings when you buy!

Low and no down payment mortgages

Mortgage type
Best for …
Down payment
Credit score
First-time home buyers, low- to moderate-income households
3.5%
580
Home buyers in rural areas
0%
640
Veterans or surviving spouses
0%
620
First-time home buyers
3%
620

Some gift funds may have tax implications
If your donors give you $16,000 or more, they have to file a gift tax return (IRS Form 709). This is per recipient. If you receive $9,000 and your spouse receives $9,000 from the same donor, a gift tax return isn’t required.

FHA

🏡 What is an FHA loan? A government-backed mortgage designed for low-income households and first-time home buyers, with lower credit score and down payment requirements

What are the requirements?

Minimum down payment
3.5% or 10% (for credit scores below 580)
Minimum credit score
580 (500 allowed if you have a down payment of 10% or more)
Maximum DTI ratio
43%
Income limits
N/A
Mortgage insurance
Up-front fee (1.75% of the loan amount) + annual MIPs (.80%–1.05%); required unless you put down more than 10% at closing

» MORE: FHA Loan Requirements 2022: How to Qualify

The home must be your primary residence. You have to move in within 60 days after closing, then live in the home for at least a year. Vacation properties don’t qualify for an FHA loan, though certain second homes may.

You need at least 2 lines of credit to apply. For example, a car loan and a credit card, or two accounts from separate credit card companies.

Buy a home within the FHA loan limits. For 2022, the FHA loan limits are $420,680 for low-cost areas and $970,800 for high-cost areas for a single-family home.

USDA

🏡 What is a USDA loan? A no-down payment mortgage designed for low- to moderate-income households planning to buy property in eligible rural areas

What are the requirements?

Minimum down payment
0%
Minimum credit score
640
Maximum DTI ratio
41%
Income limits
Max of 115% of area median income (look up your AMI)
Mortgage insurance
Upfront fee (1% of loan amount) + annual fee (0.35% of loan amount) with no option to cancel

» MORE: USDA Loan Requirements (2022)

The property must be in a qualified rural area. The USDA defines a rural area as open country that’s outside metropolitan zones with a population of 35,000 or less. You can search zip codes on the (USDA property map) to see if it's eligible.

The home must be your primary residence. You have to move in within 60 days of closing and live at the address for at least one year.

The home has to meet basic property and HUD standards. It must have adequate water, utilities, and wastewater disposal, as well as have direct access to a road or street.

VA

🏡 What is a VA loan? A no-down payment mortgage available to most U.S. veterans, low- to moderate-income households with active or retired service personnel, as well as their surviving spouses.

What are the requirements?

Minimum down payment
0%
Minimum credit score
Varies by lender
Maximum DTI ratio
41%
Income limits
N/A
Mortgage insurance
N/A

» MORE: What Are the Qualifications for a VA Loan?

Service time. To be eligible for a VA one, one of the following must be true:

  • You served 90 consecutive days during wartime.
  • You served 181 consecutive days during peacetime.
  • You served in the Reserves or National Guard for six years or more.
  • Your spouse lost their life in the line of duty or later due to a service-related disability.

The property must be a primary residence. You can’t use VA loans on vacation or investment property.

You have to meet the VA residual income requirement. The VA defines residual income as money that’s leftover after you’ve paid all your monthly essentials, such as your mortgage, utilities, and insurance. The requirements differ by region and loan size.

Fannie Mae HomeReady

🏡 What is a HomeReady loan? A mortgage insured by Fannie Mae designed for low- to moderate-income home buyers with good credit scores

What are the requirements?

Minimum down payment
3%
Minimum credit score
620
Maximum DTI ratio
45% to 50%
Income limits
Max of 80% of area median income (look up your AMI)
Mortgage insurance
PMI, which can be canceled after loan-to-value ratio reaches 20%
Homeownership course
4–6 hour course

» MORE: Do I Qualify For a HomeReady Loan?

Freddie Mac Home Possible

🏡 What is a HomePossible loan? A mortgage insured by Freddie Mac designed for low- to moderate-income home buyers with good credit scores

What are the requirements?

Minimum down payment
3%
Minimum credit score
660
Maximum DTI ratio
45%
Income limits
Max of 80% of area median income (look up your AMI)
Mortgage insurance
PMI, which can be canceled after loan-to-value ratio hits 20%
Homeownership course
4–6 hour course

Try a down payment assistance program

A down payment assistance program is a loan or grant that helps you gather cash for the closing costs or the down payment. Though the type and amount of assistance varies by state, these programs come in a few main types:

Grants
Money you don’t have to pay back
Deferred-payment loans
Money you have to pay back ONLY when you sell, refinance, or pay off the house; They come with either no- or low-interest rates.
Zero-interest, forgivable loans
Money you don’t have to pay back as long as you live in your house for a certain number of years. If you move out before this time is up, you’ll pay back the loan without interest
Repayable second mortgage
A low-interest loan that makes your down payment or closing costs more affordable by spreading it over a longer period of time, usually 10 years.
Individual development account (IDA)
You’ll get a match for every dollar you contribute up to a maximum, usually $1,000–5,000.

» JUMP: Pros and cons of a zero down payment loan

Major down payment assistance programs

🏠 What it is: government-funded program that helps public servants buy homes in distressed areas from the U.S. Department of Housing and Urban Development.

🎯 Who qualifies: teachers, law enforcement officers, firefighters, EMTs, and other public service professionals

💰 What the program offers: 50% of the purchase price of HUD homes in revitalization areas

» MORE: How to Buy a HUD Home: Step-by-Step Guide

🏠 What it is: a home that has gone through foreclosure and is now for sale by Fannie Mae

🎯 Who qualifies: home buyers with a credit score of at least 620 and a down payment of 3%

💰 What the program offers: homes selling below market averages with special financing, such as closing assistance to first-time and low-income home buyers.

» MORE: What Is a Fannie Mae HomePath Property?

💰 Buy with a local expert, save thousands.

Try Clever Real Estate’s free service: Match with top agents near you, get up to 0.5% cash back after closing.

Other ways to pay no money down

Closing costs can take a huge chunk of your savings. Some sellers agree to pay all closing costs in cash. You can then roll your portion of the closing costs into your home loan, which the seller receives anyway, and you'll have more cash for your down payment.

For example, if a buyer doesn’t have enough cash on-hand to cover closing costs on a $440,000 house, the seller might raise the price to $445,000. The buyer’s lender pays the $445,000 to the seller, who then uses the extra $5,000 to cover closing costs.

You can use gift funds from friends, family, or a charitable organization for your down payment.

You’ll need to submit a gift letter to your lender stating that the money is indeed a gift and not a loan (i.e., you don’t have to pay it back). Each loan program has slightly different definitions of an "eligible donor," so always check the requirements with your lender first.

A cash back program gives home buyers a portion of the real estate agent’s commission at closing. For example, Clever Real Estate, an agent matching service, will give 0.5% back if you close with a partner agent. For a $440,000 home, that’s $2,200 back!

» MORE: First-Time Home Buyer Grants and Programs (2022)

Is a zero down payment loan a good idea for me?

✅ Pros of a zero down payment loan
You can buy a home sooner
You might have stable employment and a great credit score, but low cash reserves. A no down payment mortgage significantly lowers the barrier to buying a home.
You won’t deplete your savings
It’s important to have some cash reserves for emergencies and essential home repairs. A no down payment mortgage prevents you from becoming “house broke.”
You’ll save money for closing costs
A buyer’s closing costs can amount to 2–5% of the home purchase. For the median home value ($440,000) that can cost between $8,800 and $22,000. A mortgage with a low down payment frees up your cash so you can cover your closing costs.

❌ Cons of a zero down payment loan
You could have a higher monthly mortgage payment
Larger loan balances typically come with higher monthly mortgage payments.
You’ll pay mortgage insurance
With a down payment lower than 20%, you’ll have to pay for mortgage insurance each month. Many no down payment loan programs require you to pay for insurance for the life of the loan.
Potential for a higher interest rate
Lenders of non-government backed loans will likely give you a higher interest rate. This offsets the risk of lending you a substantial amount of the home purchase.
You could end up owing more than the home is worth
The value of your home could decline. If that happens, you risk not being able to pay back your full mortgage balance if you had to sell the house.

FAQs

Most VA lenders require a credit score of at least 620 if you don’t have a down payment. USDA lenders typically want a minimum score of 640.

Yes. If you qualify for a USDA or VA loan, you can buy a house without having a down payment.

0%. With a USDA or VA loan, you don’t need a down payment to buy a house.

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