How to Buy a House with No Money Down



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.

Current Mortgage Rates (Novermber 2020)

Loan Term

Interest rate

APR

30-year fixed-rate mortgage

3.15%

3.38%

15-year fixed-rate mortgage

2.91%

3.06%

5/1 adjustable-rate mortgage

3.05%

3.25%

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 just 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.

How to Buy a House with No Money

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 which provide assistance of up to 100% of your down payment. Check the HUD website for local homebuying programs in your state.

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.

Low and No Down Payment Home Loans

No and Low Down Payment Mortgage Options

Min Credit Score

Down Payment

Max DTI Ratio

Income Limit

FHA Loan

580

3.5%

43%-50%

No income limits

VA Loan

580-620

No down payment

50%

No income limits

USDA Loan

640

No down payment

50%

115% of area median income

HomeReady /Home Possible Loans

620

3%

50%

 80% of area median income

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.

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. Check eligibility by visiting the Department of Veterans Affairs website.

Read More: Complete Guide to VA Loans

Home Loans that Allow Down Payment Gifts

FHA Loans

FHA loans require just a 3.5% down payment for borrowers with a 580 credit score. 100% of the funds for the down payment can be a gift.

Conventional 97 Loans

The conventional 97 loan requires just a 3% down payment, and like FHA loans, allow 100% of the down payment funds to be gift from a friend or family member.

Home Possible / HomeReady Loans

To qualify for Home Possible or HomeReady loans you need a 620 credit score, a 3% down payment, and your income cannot exceed 80% of the median income in your area.

Piggyback Loans

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

Pros and Cons of No Down Payment Mortgages

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.

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?

Down Payment Requirement by Loan Type

FHA Loan

3.5% with 580 score (10% down with 500-579 score)

USDA Loan

No down payment

VA Loan

No down payment

203k Loan

3.5%

Conventional Loan

5% - 20%

Conventional 97 Loan

3%

HomeReady Loan

3%

Home Possible Loan

3%

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.