How to Buy a House with No Money Down: Zero-Down Programs and Strategies
Yes, You Can Buy a Home with Zero Down — Here’s How
The 20% down payment is one of the most persistent myths in real estate. On a $350,000 home, that’s $70,000 — a number that stops most would-be buyers before they even start looking. But here’s the reality: the median down payment for first-time buyers in 2025 was just 8%, and several federal programs let you buy with literally nothing down.
Zero-down doesn’t mean zero cost — you’ll still need cash for closing costs, inspections, and moving. But it does mean homeownership is accessible far sooner than most people think.
Federal Zero-Down Mortgage Programs
VA Loans — The Gold Standard
If you’ve served in the military, a VA loan is the single best mortgage product available in the United States. Full stop. Here’s why:
- Zero down payment on any loan amount (no cap since 2020 for first-time VA users)
- No private mortgage insurance (PMI) — ever. This alone saves $150-$400/month on a typical loan.
- Below-market interest rates — VA rates typically run 0.25-0.5% lower than conventional rates.
- Lenient credit requirements — most VA lenders approve scores as low as 580-620.
- Limited closing costs — the VA caps what lenders can charge, and sellers can pay up to 4% of the purchase price toward your costs.
The VA funding fee (1.25-3.3% of the loan amount, depending on your down payment and prior usage) is the main cost, but it can be rolled into the loan. Disabled veterans and surviving spouses are exempt from this fee entirely.
Eligibility: Active duty (90+ days), veterans (90+ days wartime, 181+ days peacetime), National Guard/Reserves (6+ years or 90 days active), and surviving spouses of service members who died in the line of duty or from a service-connected disability.
USDA Loans — Zero Down in Rural and Suburban Areas
The USDA Rural Development Guaranteed Loan program offers 100% financing — zero down payment required. Despite the name, “rural” is loosely defined. About 97% of U.S. land mass qualifies, including many suburbs of major cities. Towns of up to 35,000 people are typically eligible.
Key requirements:
- Location: The property must be in a USDA-eligible area. Check the USDA eligibility map at rd.usda.gov before house hunting.
- Income limits: Your household income can’t exceed 115% of the area median income. For a family of four in most counties, that’s roughly $103,500 in 2026.
- Credit score: 640+ for automatic approval. Scores 580-639 may qualify with manual underwriting.
- Primary residence: Investment properties and second homes don’t qualify.
USDA loans charge a 1% upfront guarantee fee (rollable into the loan) and a 0.35% annual fee — significantly cheaper than FHA’s mortgage insurance premiums.
The overlooked advantage: USDA has no maximum loan amount. Your borrowing power is limited only by your income and DTI ratio, not by arbitrary county loan limits.
Low-Down-Payment Programs (1-3.5% Down)
FHA Loans — 3.5% Down with Flexible Credit
FHA loans accept credit scores as low as 500 (with 10% down) or 580 (with 3.5% down). They’re the go-to option for buyers with credit challenges who don’t qualify for VA or USDA.
The downside is mortgage insurance. FHA charges both an upfront premium (1.75% of the loan, rolled into the balance) and an annual premium (0.55% for most borrowers) that lasts the entire life of the loan. On a $300,000 loan, that’s roughly $138/month in perpetuity. You can only drop FHA mortgage insurance by refinancing into a conventional loan once you have 20% equity.
Compare the total costs carefully using a mortgage calculator — FHA’s lower rate may be offset by the permanent insurance premium. Read our FHA vs conventional comparison for the full breakdown.
Conventional 97 — 3% Down, No Income Limits
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs both allow 3% down payments. Unlike FHA, the PMI on these loans cancels automatically when you reach 20% equity — so the insurance cost is temporary, not permanent.
- HomeReady: Income capped at 80% of area median income. Allows non-occupant co-borrowers and boarder income.
- Home Possible: Similar income limits. Allows sweat equity and manufactured homes.
- Standard 97%: No income limit, but at least one borrower must be a first-time buyer. Requires 620+ credit score.
PMI on a 3% down conventional loan runs about 0.4-0.8% of the loan amount annually, depending on your credit score. On a $300,000 loan with a 720 score, expect roughly $100-$150/month — and it disappears once your equity hits 20%.
Rocket Mortgage ONE+ — 1% Down
Rocket’s ONE+ program requires just 1% from the buyer. Rocket contributes an additional 2% grant (up to $7,000), getting you to 3% equity on day one. Income limits apply (80% of area median income in most areas), and you must be a first-time buyer or haven’t owned a home in the past three years.
Down Payment Assistance Programs (DPAs)
Every state — and many cities and counties — offers down payment assistance to qualified buyers. These programs come in several forms:
Grants (Free Money)
Grants don’t need to be repaid. Period. Bank of America’s program offers up to $17,500. Chase’s DreaMaker includes a $5,000 grant. State housing finance agencies often provide $5,000-$15,000 in grant funds.
The catch: most grants have income limits and are restricted to specific geographic areas. Funding is typically first-come, first-served, and popular programs run out mid-year.
Forgivable Second Mortgages
These are loans that convert to grants if you stay in the home for a set period — usually 5-10 years. Leave early, and you repay a prorated portion. Many state housing agencies use this structure for assistance amounts of $10,000-$25,000.
Example: California’s MyHome Assistance Program offers a deferred-payment junior loan of up to 3.5% of the purchase price (or appraised value, whichever is less). Zero payments, zero interest, forgiven after a qualifying period.
Repayable Second Mortgages
Some DPA programs provide low-interest or zero-interest second mortgages for the down payment. Monthly payments are small (often $50-$150) and the terms are favorable — but you are repaying the assistance. Still, a 0% interest second mortgage is far better than a 20% interest credit card or no home at all.
Creative Strategies to Cover Your Down Payment
Gift Funds
All major loan programs allow gift funds for down payments. FHA, VA, USDA, and conventional loans all accept gifts from family members (parents, siblings, grandparents). Conventional loans require a gift letter confirming the money is not a loan. FHA is more flexible — gifts can come from employers, charitable organizations, or government agencies too.
Key rule: the money must be in your account and “seasoned” (typically 60 days) before you apply, or you’ll need a paper trail showing the gift transfer.
Employer Assistance Programs
Large employers — including Amazon, Google, Meta, Boeing, and many hospital systems — offer housing assistance to attract and retain workers. Benefits range from $2,500 to $20,000+ in forgivable loans or direct grants. Check with your HR department; these programs are often poorly advertised.
IRA Withdrawal
First-time buyers can withdraw up to $10,000 from a traditional IRA without paying the 10% early withdrawal penalty. You’ll still owe income tax on the withdrawal, but avoiding the penalty is significant. From a Roth IRA, you can withdraw your contributions (not earnings) at any time, penalty- and tax-free.
401(k) Loan
You can borrow up to 50% of your vested 401(k) balance (maximum $50,000) and repay yourself with interest. The advantage: no credit check, no tax hit, and you’re paying interest to yourself. The risk: if you leave your job, the loan typically becomes due within 60-90 days, or it’s treated as a taxable distribution with penalties.
The Real Cost of Zero Down: What You’re Trading
Buying with no money down is absolutely possible, but understand what you’re giving up:
Higher monthly payments. Financing 100% of a $350,000 home at 6.5% costs $2,212/month in principal and interest. Put 10% down and that drops to $1,991 — a $221/month difference, or $2,652/year.
Mortgage insurance. With less than 20% equity, you’ll pay PMI or its equivalent. On a conventional loan this cancels at 20% equity; on FHA it’s permanent unless you refinance. VA loans have no PMI but charge a funding fee.
Less equity cushion. If home values drop 5% after you buy with zero down, you’re immediately underwater — meaning you owe more than the home is worth. With 10% down, you’d still have 5% equity as a buffer.
Higher interest rate (sometimes). Lenders price risk into rates. A borrower putting 3% down with a 680 credit score will typically pay 0.25-0.5% more in rate than someone putting 20% down with a 750 score.
How to Stack Programs for Maximum Benefit
The real power move is combining multiple assistance sources. Here’s a real scenario:
- Use a Conventional 97 loan (3% down required on a $300,000 home = $9,000 needed)
- Apply for your state housing agency’s DPA grant ($7,500)
- Receive a $5,000 gift from family
- Your out-of-pocket cost for the down payment: $0
- Remaining closing costs (~$8,000): negotiate seller concessions of 3% ($9,000) in your purchase offer
Total cash needed from your savings: nearly zero. This isn’t theoretical — it happens every day in markets across the country.
Read our full step-by-step home buying guide to understand the complete purchase timeline, and use our pre-approval guide to get started with a lender who offers these programs.
Action Steps: Your Zero-Down Game Plan
- Check VA and USDA eligibility first. These are the cheapest zero-down options by far. If you qualify, stop reading and apply.
- Search your state’s housing finance agency website for DPA programs. Every state has one. Google “[your state] housing finance agency first-time buyer.”
- Get pre-approved with a lender that offers low-down-payment programs. Not all lenders participate in every DPA program. Ask specifically about state and local assistance before choosing a lender. See our list of the best mortgage lenders for guidance.
- Budget for closing costs separately. Zero down doesn’t mean zero cash. Budget 2-5% of the purchase price for closing costs, or negotiate seller concessions to cover them.
- Build your emergency fund. Owning a home with no equity and no savings is risky. Aim for 3-6 months of housing payments in reserve before you close.