{"id":24975,"date":"2021-06-30T12:47:38","date_gmt":"2021-06-30T19:47:38","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=24975"},"modified":"2026-03-25T21:48:31","modified_gmt":"2026-03-26T04:48:31","slug":"buyer-zero-down-payment","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-zero-down-payment\/","title":{"rendered":"Zero Down Payment? How to Buy a House With No Money Down"},"content":{"rendered":"

Homeownership is a dream that many people share \u2014 but saving for a down payment<\/a> can be difficult, especially in an era of high inflation. However, even if you can\u2019t make the traditional 20% down payment<\/a>, it doesn\u2019t mean you need to put your dream of owning a home on the back burner. Is there such a thing as a lower down payment…like, a zero down payment?<\/p>\n

A zero-down-payment mortgage is a home loan<\/a> that you can get without putting any money down \u2014 but only for specific loan types, and not every buyer and home will qualify.<\/p>\n

\u201cYou can walk in without [taking] any money out of your pocket,\u201d says Richard Helali, mortgage sales leader at HomeLight Home Loans<\/a> (though note that you may be responsible for some closing costs, depending on your situation). After speaking with the experts, we\u2019ll walk you through your options and what you can expect from zero-down-payment mortgages and low-down-payment programs. Financing a home may be more feasible than you think!<\/p>\n\n\n\n\n\n

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The 20% down myth<\/h2>\n

The 20% down rule is a myth<\/a> \u2014 the 20% number is really just a benchmark.<\/p>\n

\u201cSome people have the misconception that a 20% down payment is required for a home purchase when, in reality, many home loan options exist that may be able to put consumers into a home for a smaller down payment,\u201d says Mike Cornelius<\/a>, loan originator for nine years and branch manager at Motto Mortgage Experience in California. \u201cIt really depends on timing and the financial situation of the consumer.\u201d<\/p>\n

Today, there\u2019s no rule stating that you have<\/i> to put 20% down before you\u2019re able to secure a mortgage<\/a> for a house. In fact, the average first-time homebuyer<\/a> doesn\u2019t put down 20%.<\/p>\n

According to a 2020 research report from the National Association of Realtors, the average down payment on a house or condo<\/a> was 12%. For first-time buyers, this number was only 7%.<\/p>\n

\u201cOften, repeat buyers are able to put 20% down or more, typically because they are moving the equity gained in their existing home they are selling to the new home they are buying,\u201d explains Cornelius.<\/p>\n

There are loan programs that allow you to put down much less than that \u2014 as little as 3% or even no down payment! However, your down payment is also tied to the terms of your loan \u2014\u00a0the less you put down, the less favorable terms you\u2019ll get, and the more you\u2019ll pay for your loan both upfront and over time.<\/p>\n

Your down payment gives your mortgage lender a sense of security. \u201cRegardless of somebody\u2019s credit score, if they buy a house and put less than 20% down, they\u2019ll be more likely to foreclose versus someone who put at least 20% down,\u201d says Helali. \u201cIt\u2019s kind of like a \u2018skin-in-the-game\u2019 type of thing.\u201d<\/p>\n

Pros of putting no money down<\/h2>\n

The obvious advantage of a zero-down mortgage<\/a> is leaving that extra cash in the bank and not having to worry about a down payment. But there\u2019s more to it than that.<\/p>\n

A zero-down mortgage means you aren\u2019t struggling to save money to make a big down payment. Instead, you can buy a home and use cash reserves to start building equity sooner.<\/p>\n

You can also put that money toward investments instead of funneling everything<\/i> toward your down payment. By investing your money<\/a>, there\u2019s potential to build some long-term returns.<\/p>\n

Zero-down mortgages can also give you the opportunity to time the market and take advantage of low interest rates while they\u2019re available. A low interest rate means you\u2019ll pay less interest on your principal over the life of the loan.<\/p>\n\n\n\n\n\n

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Cons of putting no money down<\/h2>\n

There are drawbacks to borrowing the full purchase amount, all that said. Because you\u2019re taking out a bigger mortgage loan, you\u2019ll be making larger monthly payments. The lender is also taking on more risk, and you may have to pay a higher interest rate to make it worth their while. You\u2019ll also likely be required to pay mortgage insurance to cover the lender\u2019s risk.<\/p>\n

Your lender may also require a higher credit score<\/a> for these loans, and zero-down loans aren\u2019t widely available. Only certain qualified buyers may have the option for a zero-down-payment loan.<\/p>\n

Putting no money down also means you\u2019re starting with no home equity<\/a>, meaning it will take longer to build wealth. Home equity<\/a> is another way of talking about how much of your house you own; it\u2019s calculated by subtracting what you still owe on your mortgage from the appraised value of the home. If you owe $100,000 on a home appraised at $250,000, then you have $150,000 in equity \u2014 which can be a useful tool! Your equity will increase as you pay off your mortgage and the value of your home increases.<\/p>\n

Additionally, real estate prices depend heavily on the current market. What if there\u2019s a downturn affecting the value of your home<\/a>, and you\u2019ve found yourself in financial trouble? This could result in negative equity, which means that you\u2019re \u201cunderwater\u201d on your loan \u2014 you owe more on the mortgage than the house is worth.<\/p>\n

\u201cYou might be a little stuck. If you sell your home, you\u2019re going to have to come out of pocket with some funds,\u201d explains Helali. \u201cIt\u2019s going to be very difficult or almost impossible nowadays to refinance if you owe more than what the place is worth.\u201d<\/p>\n

Zero-down payment mortgage options<\/h2>\n

Only government-backed loans offer zero-down options to homebuyers; for conventional loans, you\u2019ll need to put something<\/i> down. Having the government backing the loan means lenders are taking on less risk compared with a conventional loan. Because of this, private lenders are more comfortable extending zero-down financing on government-backed loans with favorable rates and terms<\/a>.<\/p>\n

Here are two zero down payment options for qualifying buyers.<\/p>\n

1. USDA loan<\/h3>\n

A U.S. Department of Agriculture loan<\/a> is a zero-down mortgage option for qualifying homebuyers and homes. USDA loans<\/a> can only be used to buy homes in designated locations, which typically cover rural and some suburban areas.<\/p>\n

Most of these loans aren\u2019t directly offered through the USDA. They\u2019re government-backed loans offered by traditional lenders, such as banks and credit unions.<\/p>\n

These loan programs help thousands of Americans each year buy a house with low interest rates, a credit score as low as 640, and zero down payment. Payments on USDA loans are generally restricted to 29% or less of your monthly income, and monthly payments can\u2019t exceed 41% of your monthly income.<\/p>\n

The USDA offers two types of home loans for buyers: the Single Family Housing Guaranteed Loan Program and Single-Family Housing Direct Home Loans. According to the USDA Rural Development\u2019s yearly totals for 2020<\/a>, the USDA issued 5,825 Direct Home Loans totaling over $1 billion and 137,970 loans through the Guaranteed Loan program totaling over $23 billion.<\/p>\n

The Guaranteed USDA Loan is typically for low- or moderate-income borrowers, while Direct Home Loans favor low-income and very-low-income Americans who can\u2019t access any other type of financing for a safe and sanitary residence.<\/p>\n

Here\u2019s what you need to qualify for these loan programs:<\/p>\n