Can You Buy a House Without a Down Payment?

Purchasing a home often involves an upfront financial commitment: a down payment. This initial sum typically represents a portion of the home’s purchase price. While a substantial down payment can reduce the loan amount and potentially lower monthly mortgage payments, it is not always a requirement for homeownership. Many pathways exist that allow individuals to acquire a home with little to no money paid upfront.

Zero Down Payment Mortgage Options

Several mortgage programs are designed to enable eligible homebuyers to purchase a residence without a down payment. These options are typically backed by government entities, aiming to make homeownership more accessible. Eligibility criteria for these programs vary.

VA loans, guaranteed by the U.S. Department of Veterans Affairs, are a prominent option available to qualifying veterans, active-duty service members, National Guard and Reserve members, and eligible surviving spouses. They finance 100% of the home’s value, eliminating the need for a down payment. These loans also typically do not require private mortgage insurance, which can lower monthly housing costs.

To access VA loan benefits, an eligible individual needs a Certificate of Eligibility (COE) from the VA. Borrowers can obtain their COE directly from the VA, online, or through a VA-approved lender.

USDA loans, also known as Rural Development loans, are offered through the U.S. Department of Agriculture. These loans promote homeownership in eligible rural and some suburban areas. They feature 100% financing, competitive interest rates, and reduced upfront and annual fees.

Eligibility for USDA loans depends on property location and borrower income. Properties must be in designated rural areas, which can include towns with populations up to 35,000 that meet specific criteria. Borrowers must also meet household income limits, which for 2025 are $119,850 for 1-4 person households and $158,250 for 5-8 person households in many areas. Online property eligibility maps are available from the USDA. These loans are intended for primary residences, and properties must meet USDA safety, structural, and livability standards.

Low Down Payment Mortgage Options

Beyond zero down payment programs, several mortgage types allow homebuyers to enter the market with a smaller upfront investment than the traditional 20% down payment. These options offer flexibility for those with some savings but not enough for a large down payment. Each program has specific eligibility requirements and associated costs.

FHA loans, insured by the Federal Housing Administration, are popular for their flexible qualification criteria. They typically require a minimum down payment of 3.5% of the home’s purchase price. FHA loans are often suitable for borrowers with moderate credit scores, making homeownership accessible.

FHA loans require mortgage insurance premiums (MIP). This includes an Up-Front Mortgage Insurance Premium (UFMIP) of 1.75% of the loan amount, which can be financed, and an annual MIP paid monthly. The annual MIP duration depends on the down payment; it is required for 11 years if the down payment is 10% or more, but for the entire loan term if the down payment is less than 10%. FHA loan requirements and limits are available on the HUD website.

Conventional loans, while typically associated with a 20% down payment, also offer options for lower down payments, sometimes as little as 3% or 5%. When a down payment less than 20% is made, private mortgage insurance (PMI) is generally required. PMI protects the lender in case of borrower default and is typically paid monthly.

PMI on conventional loans can often be canceled once the homeowner builds sufficient equity. Lenders typically allow borrowers to request PMI cancellation once 20% equity is reached, and it is automatically terminated once 22% equity is achieved. This differs from FHA MIP, which is more challenging to remove.

Down Payment Assistance (DPA) programs reduce out-of-pocket costs for homebuyers. These programs, offered by state and local housing finance agencies, provide funds in various forms, such as grants, second mortgages, or deferred loans. DPA programs are often combined with FHA or conventional loans to cover part or all of the down payment and sometimes closing costs. Eligibility for DPA programs varies by location and income; information is typically found through state housing finance agencies.

Other Upfront Homebuying Costs

While zero or low down payment mortgage options reduce the initial cash needed for a home purchase, other upfront costs are involved. These expenses are distinct from the down payment and must be budgeted for by prospective homebuyers. Awareness of these costs helps ensure a smoother homebuying process.

Closing costs represent various fees paid at the closing of a real estate transaction to finalize the mortgage and transfer ownership. These include loan origination fees, appraisal fees, title insurance, and recording fees. Closing costs typically range from 2% to 5% of the total loan amount.

Prepaid expenses are costs paid at closing that cover future expenses related to owning the home. These often include a portion of property taxes and homeowner’s insurance premiums, often placed into an escrow account managed by the lender. This ensures ongoing expenses are covered and can include prepaid interest, covering interest accrued from the closing date to the first full mortgage payment period.

An earnest money deposit is an upfront cost, serving as a good-faith deposit to show buyer commitment. This deposit, typically 1% to 2% of the home’s sale price, is held in escrow. If the transaction proceeds, the earnest money is usually applied towards the down payment or closing costs.

Buyers also incur fees for a home inspection and an appraisal before closing. While the appraisal fee is often included in closing costs, the home inspection fee is usually paid directly to the inspector. These services provide information about the property’s condition and value, helping buyers make informed decisions.