How to Get a Mortgage With No Down Payment

A 20% down payment isn’t the only way to get a mortgage. No-down-payment home loans can open doors to homeownership for buyers with limited savings and free up cash for expenses such as closing costs or home repairs. Here’s what you can expect when you’re buying a home with no money down.

Locking in a low mortgage rate now can save you thousands of dollars over the life of your loan. Compare your mortgage rate offers with national average trends for current mortgage rates.*

You can get a no-down-payment mortgage, although you’re more likely to find a low-down-payment mortgage. Many mortgages require a down payment, even a minimal 3%. But putting down 20% is no longer the standard, even for some conventional loans.

While it’s true that the best terms are generally reserved for well-qualified applicants who can make a 20% down payment, you can take advantage of various mortgage programs that demand far less.

But if you want a no-down-payment home loan, keep in mind that the loan types available to you may be limited. Typically, no-down-payment mortgages come in the form of government loans or special lender programs.

Unfortunately, homebuyers with low credit scores might not qualify for some programs.

There is no single minimum credit score you need to get a no- or low-down-payment mortgage; it varies by program. For example, VA home loans don’t have a minimum credit score requirement, and neither do USDA home loans. With FHA home loans, you can get a mortgage with a credit score as low as 500, but you can reduce your down payment if your score is higher than 580.

The important thing to remember is with a higher credit score you’ll be able to qualify for lower interest rates on your loan.

Zero-down-payment loan options are the key to homeownership for many borrowers who lack the savings to put toward a home but qualify for a loan. Generally, conventional loans don’t provide zero-down-payment options.

Here are a few zero-down home loan programs to explore with 100% financing for your primary residence.

The VA offers a zero-down-payment loan with no loan limit but a limit on what the VA will guarantee for qualifying veterans and spouses. Veterans who want to apply must furnish a Certificate of Eligibility.

The VA loan program has no minimum credit score, but most VA-approved lenders have credit score requirements.

Some borrowers may need to pay an upfront funding fee, which can be financed. VA home loans do not require mortgage insurance.

“People think USDA is all about farms, but it’s about areas that are outside of suburbia,” says Bill Banfield, executive vice president of capital markets, Quicken Loans.

The Single Family Housing program has no credit score requirements, but applicants must show an ability to manage debt and pay bills.

Not only is no down payment needed, but also the mortgage insurance is only 0.35%, compared with 0.85% for an FHA loan.

Many lenders participate in the Doctor Loan Program, and some offer zero-down options. The program is designed for early career physicians, dentists, residents and fellows, who frequently have little or no money saved and big student loan bills.

Many credit unions have zero-down mortgages, although they generally require membership to qualify. Promotions can change, so check with your lender for the latest information.

A zero-down mortgage is a great option for a homebuyer who has limited cash on hand but is otherwise well-qualified to purchase a home.

Some good reasons for choosing a no-money-down mortgage are to:

Getting into a home without making a large down payment might sound attractive, but putting money down on a mortgage has its benefits. Even a small down payment can save money because your monthly payment will cost less, you may lock in a lower interest rate, and you could avoid paying private mortgage insurance.

Some good reasons for making a down payment on your mortgage:

If you can’t afford a down payment, consider down payment assistance programs. Down payment and closing cost assistance programs are available nationwide, especially for first-time homebuyers or homebuyers who meet certain income requirements.

“There are various down payment assistance programs available, depending on your state, city and county, and a local lending specialist can provide you with that information,” says Ann Thompson, retail sales executive-West, consumer lending, Bank of America. “There are also programs with a higher interest rate where you can get partial bank-paid credit to help with closing costs.”

Some banks have special programs for low- to moderate-income homebuyers, which may include down payment assistance and grants. “The goal is to give people access to credit to help meet down payment requirements,” Banfield says.

If you can swing a down payment of any size, you will broaden your loan options and save on interest charges. Overall, your mortgage costs will be less if you can foot even 3% of the loan value as a down payment.

“There’s no free lunch,” says David Battany, vice president of capital markets, Guild Mortgage.

Consider these low-down-payment mortgage options:

A piggyback loan is a second loan taken at the same time as your primary mortgage to cover a substantial portion of your home’s purchase price. It can be used to cover part of your down payment. This type of loan can reduce the cash you need to purchase a home and help you avoid private mortgage insurance. A piggyback loan can also ensure that your loan amount stays under conforming loan limits, which can make it easier to qualify for a government-backed loan.

The FHA offers a low-down-payment mortgage that allows you to put as little as 3.5% down. Borrowers can qualify with credit score requirements that are more lenient than conventional low-down-payment loans. Your FICO score must be at least 580 to make a 3.5% down payment. For scores between 500 and 579, you’ll need a 10% down payment.

This program offers a 3%-down-payment loan for low- to middle-income homebuyers. That’s slightly lower than 3.5% for the FHA loan, but the credit guidelines are tougher. Your credit score must be at least 620 to get a HomeReady loan, and if it is 680 or higher, you could get better pricing.

This fixed-rate loan has a down payment as low as 3% and lower-cost mortgage insurance than on FHA loans. Freddie Mac’s Home Possible program is available for buyers with credit scores of 620 or higher.

The Conventional 97 Fannie Mae loan requires a 3% down payment and sets no income limits. You’ll need a credit score of 620 or higher for this conventional loan.

The Department of Housing and Urban Development’s Good Neighbor Next Door program is for eligible teachers, law enforcement officers, firefighters and emergency medical technicians. Eligible borrowers can purchase a HUD-owned single-family home for 50% off its appraised value.

The required down payment is as low as $100, and the buyer must live in the home as a primary residence for at least three years.