A zero-down mortgage isn’t a myth, and it isn’t only for veterans or farmers. It’s a real loan product with specific eligibility rules, and if you fit them, you can buy a house with nothing out of pocket for the down payment. The tricky part is figuring out which program you actually qualify for, and what it costs you every month for the next 30 years.
Most buyers still assume 20% down is mandatory. It hasn’t been for decades. The median down payment for first-time buyers sits around 8%, and zero is possible. The best mortgage types for buyers with no down payment break down into a few clear categories.
VA Loans: The Strongest Zero-Down Option Available
If you’re an eligible veteran, active-duty service member, or surviving spouse, the VA loan is almost always the best deal on the table. No down payment, no monthly mortgage insurance, and rates that typically run 0.25% to 0.5% below conventional loans.
The one upfront cost is the VA funding fee: 2.15% of the loan amount for a first use with zero down. On a $350,000 purchase, that’s $7,525, and most borrowers roll it into the loan. Veterans with a service-connected disability skip the fee entirely.
There’s no income limit and no first-time buyer requirement. If you’ve served, this is the first program to check.
USDA Loans: Zero Down for Rural and Some Suburban Buyers
The USDA Section 502 Guaranteed loan is the other true zero-down mortgage. It targets low- and moderate-income buyers in eligible rural areas, but “rural” is broader than most people expect. Towns with populations up to 35,000 usually qualify, and the eligibility map includes plenty of suburbs on the edge of metro areas.
Income limits apply, generally capped at 115% of the area’s median household income. Fees are modest: a 1% upfront guarantee fee and an annual 0.35% fee, which is cheaper than FHA’s 0.55% annual mortgage insurance.
If your income sits on the lower end, the USDA pairs well with state-level help. It’s worth reading up on mortgage options designed for low-income buyers before assuming you can’t qualify for anything.
FHA Loans and the 3.5% Workaround
FHA loans aren’t zero-down. They require 3.5% down with a credit score of 580 or higher, and 10% if your score falls between 500 and 579. Even so, FHA is the most common route to a no-down-payment purchase because it stacks so cleanly with down payment assistance.
The credit flexibility is the selling point. A 580 credit score still unlocks FHA financing at the full 3.5% threshold, and plenty of lenders approve buyers in that range when the rest of the file looks stable.
FHA also lets sellers contribute up to 6% of the purchase price toward closing costs. Pair that with a grant or second lien, and the 3.5% often vanishes.
Down Payment Assistance Programs That Fill the Gap
There are over 2,000 down payment assistance programs in the U.S., run by state housing agencies, cities, counties, and nonprofits. They fall into a few categories:
- Grants — money you never repay, usually for very low-income buyers or specific professions.
- Forgivable loans — a second mortgage forgiven entirely if you stay in the home for a set period, often five to ten years.
- Deferred-payment second mortgages — a silent lien at 0% interest, repaid when you sell or refinance.
- Low-interest second mortgages — a repayable loan covering the down payment and sometimes closing costs.
The deferred-payment option is the one most buyers end up using. It works like a second mortgage that sits quietly behind your first, with no monthly payment and no interest accruing. The trade-off: it reduces your equity when you sell, and certain programs charge a recapture tax if you move within nine years.
How Assistance Stacks With Your First Mortgage
Most DPA programs require a specific first mortgage, usually FHA, USDA, VA, or a conventional loan with a 3% down option. You’ll typically complete a homebuyer education course, which takes a few hours online and costs $50 to $100.
One rule that catches people: you usually can’t combine two DPA programs on the same loan. Pick the one with the best terms, not the biggest headline number.
Credit Union and Specialty 100% Financing
A handful of credit unions offer their own zero-down mortgages. Navy Federal, for example, has a 100% financing option for members with qualifying credit. These loans skip mortgage insurance, but the rate typically runs 0.5% or more above a VA or USDA loan.
Membership is required, often through a family member, employer, or geographic area. If you don’t have a military connection, check local credit unions — some run portfolio loans with flexible underwriting that big banks won’t touch. Comparing them is part of the process for first-time home buyers figuring out what each loan really costs.
What Zero Down Actually Costs You
No down payment doesn’t mean no cash. You’ll still need:
- Closing costs: 2% to 5% of the purchase price, which is $6,000 to $15,000 on a $300,000 home.
- Appraisal and inspection: $500 to $1,000 combined.
- Moving costs and any immediate repairs.
Some DPA programs cover closing costs, and sellers can contribute in many deals, but plan on a few thousand dollars out of pocket.
The long-term math matters too. Zero-down loans often carry higher rates or upfront fees. A VA loan at 6.25% with a 2.15% funding fee can still beat a conventional loan at 6.75% with private mortgage insurance over 30 years. Run both scenarios.
With no equity at closing, you’re also more exposed if values dip. That’s not a reason to avoid zero-down, but it is a reason to buy a home you’ll keep for at least five years.
Which Zero-Down Option Fits You?
Match your situation to the right program:
- Military service: VA loan. Zero down, no PMI, best rates.
- Rural or small-town property: USDA Section 502. Zero down, low fees, income limits.
- Credit score 580 to 639: FHA plus down payment assistance.
- Good credit, higher income: Conventional 97 or HomeReady with a DPA second mortgage.
- Credit union member: Check for a 100% financing product, but compare the rate.
Still weighing choices? A side-by-side look at low down payment mortgage options from 3% down to zero down can clarify how the numbers compare.
Before You Make an Offer With Nothing Down
Get a fully underwritten pre-approval, not just a pre-qualification. That means the lender has verified your income, assets, and credit. Sellers take zero-down offers more seriously when the financing is already solid.
Ask your loan officer three questions: Which DPA programs do you work with? Can the assistance cover closing costs too? What’s the total monthly payment including taxes, insurance, and any fees? If the answers are vague, find another lender.
Zero-down buying works. It just takes the right program and a clear-eyed look at the numbers.