Zero-down mortgages exist. They just aren’t stacked on a shelf in a dozen flavors. The mortgage types with no down payment come from three places: a government guarantee, a rural address, or a specific lender program aimed at a narrow slice of borrowers. Most everything else advertised as “no money down” is a 3% or 3.5% loan paired with a grant that quietly covers the gap.
Knowing which bucket you fall into takes about ten minutes of honest self-assessment. Knowing what each one costs you over 30 years takes a little longer.
First, Separate the Down Payment From the Cash You Need
A 0% down loan still costs money on the day you sign. Appraisal around $600, title insurance, lender origination, recording fees, prepaid property taxes, and the first year of homeowners insurance typically add up to 2%–5% of the purchase price. On a $300,000 house, that’s $6,000 to $15,000 in cash whether your down payment is zero or not.
Seller concessions help. VA allows sellers to cover up to 4% of the price in closing costs and prepaids, USDA allows 6%, and FHA allows 6%. That’s how plenty of buyers close with a few thousand dollars out of pocket instead of fifteen.
The second distinction matters more than people expect: 0% down is not the same as 0% cash. Ask any loan officer for a Loan Estimate with the whole picture, not just the down payment line.
VA Loans: The Only True 0% Down Mortgage With No Income Ceiling
For eligible veterans, active-duty service members, and surviving spouses, the VA loan is the best no-down-payment product available anywhere. Full financing, no monthly mortgage insurance, and no cap on loan size if you have full entitlement.
Who actually qualifies
- 90 consecutive days of active duty during wartime, or 181 days during peacetime
- Six years in the National Guard or Reserves, or 90 days of active service under Title 32
- Certain surviving spouses who haven’t remarried
You’ll need a Certificate of Eligibility, which your lender can usually pull in minutes through an automated system.
The funding fee is real money
First-time use with nothing down carries a 2.15% funding fee (3.3% on subsequent use). On a $350,000 purchase, that’s roughly $7,525, almost always rolled into the loan balance. Veterans receiving disability compensation are exempt, which is worth confirming before you assume you owe it.
Compare that fee to what FHA charges. On a $350,000 FHA loan, the annual mortgage insurance premium runs about $160 a month and, in most cases with less than 10% down, never goes away. The VA funding fee is paid once.
The friction point with VA isn’t the terms, it’s the appraisal. VA appraisals flag safety issues more aggressively, and some sellers quietly steer away from VA offers. It’s a negotiation problem, not a program flaw. The breakdown of VA, USDA, and the 3.5% workaround covers how to compete with those offers.
USDA Loans: Zero Down, and the Map Decides for You
The USDA Rural Development guaranteed loan finances up to 100% of the purchase price. It doesn’t require a farming background, and plenty of eligible areas sit 20 minutes outside mid-sized cities. The property has to be in a designated rural area, generally open country or towns under 35,000 people, and the address either qualifies or it doesn’t. There’s no appeal process.
Income limits are the second gate. Household income typically can’t exceed 115% of the area median, adjusted for family size. In a county with a $78,000 median, a family of four might max out near $89,700. Two incomes can push you over that line faster than you’d think.
Costs run lower than FHA: a 1% upfront guarantee fee and 0.35% annual, versus FHA’s 1.75% upfront and 0.55% annual. The trade-off is speed and paperwork. USDA files get extra scrutiny, and 30 to 45 days is normal, sometimes longer.
Conventional 0% Programs From Individual Lenders
This is the category most buyers don’t know exists. A handful of banks and credit unions offer true zero-down conventional loans to specific borrowers in specific places.
Bank of America’s Community Affordable Loan Solution has offered 0% down with no closing costs and no mortgage insurance to first-time buyers in designated neighborhoods, with income limits and a homebuyer education requirement attached. Navy Federal Credit Union has offered 100% financing to eligible members. These programs change guidelines without much announcement, so verify current terms rather than trusting a blog post from two years ago.
When you’re comparing a lender-specific 0% program against VA or USDA, line up every row, not just the down payment column. A row-by-row mortgage comparison chart is the fastest way to see where the insurance, fees, and rate differences land.
The 3.5% FHA Route and How Buyers Get to Zero Anyway
FHA isn’t a no-down-payment loan. It’s a 3.5% down loan with a 580 minimum credit score, and 10% down if your score falls between 500 and 579. On a $300,000 house, 3.5% is $10,500.
That gap gets closed with down payment assistance, and there’s more of it than most buyers realize. Three common shapes:
- Forgivable second liens that disappear after a set number of years if you stay in the home
- Deferred-payment second mortgages at 0% interest, repaid when you sell or refinance
- State and local housing finance agency grants, often $5,000 to $25,000, layered on top of an FHA first mortgage
Stack a $10,500 grant against a 3.5% requirement and the buyer’s cash contribution becomes zero. The catch is that assistance programs come with income caps, purchase price limits, and homebuyer counseling, and they often nudge the interest rate up an eighth or a quarter point. What actually works below 20% down digs into which of these structures hold up over time.
What No-Down-Payment Loans Won’t Do
They won’t buy you a rental. Investment properties typically require 15% to 25% down, and the pricing is worse across the board, which is why the financing routes landlords actually use look nothing like a primary-residence loan. Second homes generally start at 10% down.
They also won’t rescue weak credit. VA still has lender overlays that can push the practical score floor to 620. USDA typically wants 640. A 0% down program with a 7.5% interest rate isn’t a gift.
The Trade-Off Nobody Puts in the Brochure
Every no-down-payment loan trades cash today for cost later. The question is how much later and how much cost.
FHA mortgage insurance is the heaviest. The 1.75% upfront premium gets financed, and the annual 0.55% premium usually lasts the life of the loan when you put down less than 10%. On a $300,000 balance, that’s $1,650 a year, forever, unless you refinance into something else. Conventional PMI, by contrast, falls off automatically at 78% loan-to-value and can be removed earlier with an appraisal.
VA has no monthly insurance at all. USDA’s 0.35% annual fee is the cheapest of the three. Those differences compound: over seven years, the gap between a VA loan and an FHA loan on the same house can reach five figures.
The cheapest mortgage isn’t automatically the one with the lowest rate or the smallest down payment. It’s the one that matches your eligibility, your timeline, and your cash position, and those three things rarely point at the same product.
How to Sort This Out in One Sitting
Work through eligibility in order, because the strongest option is usually the one you already qualify for and didn’t check.
Military service in the family, anywhere in the last several decades? Pull a Certificate of Eligibility first, before you look at anything else. Considering a house outside a metro core? Type the address into the USDA’s eligibility map, which takes 30 seconds and settles the question immediately. Neither applies? Then you’re shopping FHA with stacked assistance or hunting for a lender-specific 0% program, and both require phone calls rather than web forms.
Get two Loan Estimates on the same house on the same day and compare the total monthly payment, the cash to close, and how long the mortgage insurance lasts. Those three numbers tell you more than any marketing page will. A loan with 0% down and permanent mortgage insurance can cost more each month than a loan with 3% down and cancellable PMI, and the only way to see it is side by side on paper.