No-Down-Payment Mortgage: How to Buy a Home Without a Down Payment

Saving up enough money for a down payment is one of the biggest obstacles to buying a house, especially for first-time homebuyers. In the U.S., the median home sale price is $420,400, so even making a 3% down payment will cost you $12,612.

Applying for a no-down-payment mortgage is a great way to overcome this hurdle. These mortgages allow borrowers to finance 100% of their home purchase, providing a more affordable path to homeownership.

What is a no-down-payment mortgage?

A no-down-payment mortgage is a home loan that doesn’t require you to make a down payment at closing. Most mortgages require a down payment ranging from 3% to 20% of the home’s sale price, but 100% financing home loans don’t require any money down. These mortgages remove one of the most significant financial burdens of buying a home, but they typically have additional requirements. 

How do no-down-payment mortgages work?

When you qualify for a zero-down-payment mortgage, you can finance the entire purchase of your home and don’t have to make a down payment. “It enables buyers to gain entrance earlier into the market without having to go through a very stressful and prolonged process of saving money for a down payment,” explains Alexei Morgado, founder and CEO of Lexawise. “This also saves money for other needs such as closing costs, maintenance, and emergencies.” 

However, zero-down mortgages aren’t always easy to qualify for. Many of these options — like USDA and VA loans — are backed by the federal government and have additional requirements or fees. In addition, each lender can set its own criteria, so you may have to do a bit of digging to find the right opportunity. 

Types of no-down-payment mortgage programs

There are several types of no-money-down mortgage programs available, and each one caters to a different type of borrower. Here’s an overview of each:

• VA loans: VA loans are available for eligible veterans, active-duty service members, and surviving spouses. These loans don’t come with any down payment requirements, and you don’t have to take out private mortgage insurance (PMI). However, most borrowers do have to pay a one-time VA funding fee, which is between 1.25% and 3.30% of the loan amount.
• USDA loans: USDA loans are designed for low-income borrowers who are buying a home in eligible rural areas. There’s no required down payment or PMI, but you will have to pay a guarantee fee.
• Doctor loan: If you’re a medical professional, you may qualify for a doctor loan program. These loans are designed to help doctors and dentists buy a house, and many don’t require a down payment.
• Down payment assistance: Down payment assistance programs cover the cost of a down payment and are usually designed for low-income or first-time homebuyers. These programs are offered by federal, state, or local governments and may also be available through private organizations. 

Eligibility requirements for no-down-payment mortgages

Steve Marcinuk, a real estate investor and co-founder of KeyCrew, says the eligibility requirements for zero-down-payment mortgages can vary depending on the type of loan you’re applying for. For example, down payment assistance programs often come with income limits and restrict eligibility to first-time homebuyers. 

“Many of these programs operate at the state or local level, meaning requirements can vary based on where you live. Some employers now offer assistance programs as well, though these would require being employed by participating companies,” he says.

“VA loans require military service or veteran status and a Certificate of Eligibility (COE),” says Steven Parangi, manager of Alpine Mortgage. “USDA loans have geographic and income restrictions — the property must be in an eligible rural area, and household income typically can’t exceed 115% of the area median income.”

Here are some typical requirements for no-down-payment mortgage programs:

Pros and cons of no-down-payment mortgages

How to apply for a no-down-payment mortgage

Here are the steps you’ll take to apply for a no-down-payment mortgage:

1. Determine your eligibility: Start by determining which no-down-payment mortgage you’re eligible for. “You can verify your eligibility for VA or USDA loans by checking service records or property location and income limits,” Parangi says.
2. Gather your documents: Next, you can prepare financial documents like tax returns, pay stubs, or bank statements. 
3. Pick a lender: Parangi says potential homebuyers should look for experienced zero-down-payment mortgage lenders. 
4. Get pre-approved: It’s important to get pre-approved for a mortgage so you’ll know how much you can borrow. It also shows sellers that you’re a serious homebuyer and you have funding lined up. 
5. Submit your application: Once your offer has been accepted, Parangi says you’ll continue to work with your lender to complete your application and work toward closing.