How to Buy a House with No Money Down


no down payment mortgage programs

If you’re interested in buying a house with no money down, you may be in luck.

There are mortgage programs that do not require a down payment or require very little down.

This article explores how you can buy a house with no money and the types of home loans that require little to no money upfront.

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How to Buy a House with No Money Down

There are two types of home loans that don’t require a down payment. USDA loans and VA loans. If you’re not a veteran or buying a home in a USDA-eligible location, then you won’t qualify.

But that doesn’t mean you can’t get a mortgage with no money down; you need to get creative.

Most types of home loans allow the down payment to be a gift from a friend or relative. Or you could qualify for down payment assistance.

Get a VA or USDA Loan – The only two home loan programs that offer 100% financing are VA Loans and USDA Loans. If you’re not a veteran or buying a home in a rural area, then you’ll need a little help.

Be gifted the down payment – Some mortgage loans allow down payment gifts. FHA, Home Possible, HomeReady, and conventional 97 loans require 3.5% down or less and allow the down payment to be a gift from family or friends.

Check down payment assistance programs – You may qualify for down payment assistance programs that assist with up to 100% of your down payment. Check the HUD website for local homebuying programs in your state.

Ask the seller to cover your closing costs – Closing costs are fees charged by lenders for issuing and processing a mortgage loan. On average, closing costs are between 2% – 5% of the total loan amount. You should ask the seller to pay your closing costs or receive closing cost assistance.

Zero Down Payment Home Loans

USDA Loans (No money down)

The U.S. Department of Agriculture created the USDA loan program to help low-income families become homeowners in rural areas of the country. 

Besides not requiring any money down, USDA loans have the lowest mortgage insurance premium (MIP) is much lower than any other type of mortgage available. Just 0.35% compared to 0.85% for FHA loans.

  • Minimum credit score requirement of 620
  • 100% financing
  • 50% maximum debt-to-income ratio
  • Must be in a USDA-eligible rural location

Read More: Complete Guide to USDA Loans

VA Loans (No money down)

VA loans offer 100% financing for our military veterans. The VA does not require mortgage insurance; instead, they charge a one-time VA funding fee to help the program be self-sufficient. The fee is 2.15% of the loan amount. 

  • 580+ credit score
  • 100% financing
  • 50% maximum debt-to-income ratio

Read More: Complete Guide to VA Loans

Good Neighbor Next Door Program ($100 down)

The Good Neighbor Next Door Program (GNND) is a government program that offers HUD homes for 50% off and just a $100 down payment to law enforcement officers, teachers, and firefighters/emergency medical technicians. If you qualify for the GNND program, you need to get an FHA loan to finance the property to get the loan with just a  $100 down payment.

  • Available to Law enforcement officers, teachers, and firefighters/emergency medical technicians only
  • 580+ credit score
  • $100 down payment

 

Low Down Payment Home Loans

FHA Loans (3.5% down)

FHA loans require just a 3.5% down payment if you have at least a 580 credit score. Borrowers with a 500 credit score may be eligible with 10% down. FHA loans allow 100% of the down payment to be gifted from a family member or friend.

  • 580+ credit score
  • 3.5% down payment
  • 50% maximum debt-to-income ratio
  • 100% of the down payment can be a gift

 

Home Possible and HomeReady Loans (3% down)

Fannie Mae and Freddie Mac created the HomeReady and Home Possible Loan Programs to compete with low down payment mortgages. To qualify, borrowers need a 620 credit score, 3% down, and income below the income limit of 100% of the area median income. Gifted down payment funds can be used for 100% of the required 3% down payment.

  • 620+ credit score
  • 3% down payment
  • Income cannot exceed 100% of the area median income
  • 100% of the down payment can be gifted

 

Conventional 97 Loans (3% down)

A conventional 97 loan is another 3% down payment conventional mortgage. There are no income limits, but the minimum credit score requirement is 680. Conventional 97 loans allow 100% of the down payment funds to be gifted to the borrower.

  • 680+ credit score
  • 3% down payment
  • 50% maximum debt-to-income ratio
  • Down payment gift funds allowed

 

Piggyback Loans (10% down)

Piggyback loans avoid PMI by getting two loans. An 80/10/10 piggyback is two loans, one for 80% of the purchase price and 10%. The remaining 10% is your down payment, which can be a gift.

  • 680+ credit score
  • 10% down payment
  • No PMI
  • A portion of the down payment can be gifted

 

Pros and Cons of Buying a Home with No Money Down

Pros

Cons

  • Keep your money in savings

  • Don't have to wait until you save enough to buy a home

  • Take advantage of great no & low down payment loans

  • Start building equity in your home sooner

  • Mortgage insurance will be required

  • You will be approved for a lower loan amount

  • Your interest rate will be higher

  • The mortgage payment will be higher

Frequently Asked Questions

Is it possible to buy a house with no money?

Yes. VA and USDA loans do not require a down payment, and other programs allow the down payment to be a gift or come from a down payment assistance program.

How can I get money for a downpayment on a house?

The money for a down payment must come from your savings or 401k account. The funds can also be a gift or come from a down payment assistance program or a gift from a family member or friend.

What is the easiest mortgage to qualify for?

FHA loans have the lowest credit score requirements of any mortgage type. Borrowers can qualify for an FHA mortgage with a 500 credit score with a 10% down payment. Borrowers with a 580 credit score or higher will need 3.5% down.

How much should a first-time homebuyer put down?

There are first-time buyer’s mortgage programs that allow a borrower to put just 3% down.

What is the minimum down payment for a mortgage?

FHA loans require 3.5% down. A conventional loan requires at least 5%. VA and USDA loans are the two home loans that don’t require a downpayment.

If I make a low down payment, do I pay mortgage insurance?

Yes. The only time you can avoid mortgage insurance with a low down payment is if you are a veteran and qualify for a VA loan. All other mortgages will require mortgage insurance with less than 20% down.

What are the benefits of putting more money down?

The more money you put down, the higher the loan amount you will be approved for. If you have 20% to put down, a conventional mortgage will not require any mortgage insurance, saving you thousands per year.