How To Get a Mortgage with No Down Payment

Apr 27, 2020

For many people, the concept of a mortgage goes hand-in-hand with a down payment.

“I’d love to buy a house, but I don’t have enough for a down payment.”

“We’re saving up for a down payment so we can get our own place.”

It’s strange to consider the possibility of mortgages with no down payments, but they do exist. The first down-payment-free mortgages became available after World War II and were for former service members only, courtesy of the Veterans’ Administration (VA).

The VA loan is still an option for veterans, and more zero down payment loans have emerged to eliminate down payments for even more people. If you're looking to get a mortgage with no down payment, here’s what might be available:

VA Purchase Loans

The VA Purchase Loan allows qualifying veterans to purchase a home with no down payment, provided that:

  • The purchase price doesn’t exceed the appraised value of the property
  • Your mortgage amount doesn’t exceed your loan limit, which is based on the amount that the VA will pay if you default

With a VA loan, you don’t have to purchase private mortgage insurance, which most private lenders require if your down payment is less than 20% of the loan value. VA borrowers are also exempt from mortgage insurance premiums, or MIPs, the version of mortgage insurance that the Federal Housing Administration requires of its borrowers.

VA purchase loans carry many other benefits as well. If you qualify, you can expect:

  • Lower interest rates than those offered by private lenders
  • More appealing loan terms 
  • Fewer or no closing costs 
  • No early payment fees

To apply for a VA loan, you’ll need a certificate of eligibility from the Department of Veterans Affairs. You’ll also need to pay a funding fee of 2.3% if it’s your first loan, assuming you choose not to submit a down payment. Fees are higher for repeat borrowers.

USDA Loans

The US Department of Agriculture, or USDA, offers home loans with no down payment to people who want to buy, rehabilitate, or relocate a property in an eligible rural area. To qualify, you must have a household income that’s 115% of the median income in the region where you want to buy.

USDA loans are all 30-year fixed-rate mortgages, and you have to agree to occupy the property as your primary residence. Interest rates and terms depend on the individual lender.

Credit Union Loans

If you don’t qualify for a USDA or VA loan, consider a credit union. Many credit unions across the country offer 0% down payment mortgage options, though you may have to become a member first. For example:

  • Alliant Credit Union offers a 0% down payment option for qualifying first-time homebuyers who have a credit score of at least 740 and a debt-to-income ratio of no more than 40%. Those who aren’t first-time homebuyers can qualify for a 3% down payment assuming a credit score of at least 620. No private mortgage insurance is required.
  • Orange County Credit Union offers mortgage products with no down payment to well-qualified first-time and experienced home buyers. You’ll need a credit score of 720 or above, full income documentation, and at least two months of mortgage payments in reserve.
  • The NASA Federal Credit Union offers 0% down payment mortgages without private mortgage insurance to borrowers in qualifying states. 0% down payments are available on mortgages of up to $650,000. You can borrow more, but some down payment is required.

Programs like these may require you to be a member of the sponsoring credit union. If you don’t qualify for the programs above, do some research and find out whether you qualify for membership in a different credit union. The National Credit Union Administration has a searchable database. 

The Doctor Loan Program

Many lenders across the United States offer mortgages with zero or low down payments to early-career physicians and dentists. Some extend the privilege to veterinarians. 

These loans are designed to help doctors who are graduating with a large amount of student debt. For that reason, many lenders choose to ignore medical school debt when determining an applicant’s debt-to-income ratio. For context, most lenders require that your debt be no more than 43% of your gross monthly income.

Low Down Payment Options

If you don’t qualify for any of the above programs, don’t fret. You may still qualify for a lending program that brings your down payment close to zero.

FHA Loans

The Federal Housing Administration guarantees loans with a down payment of 3.5% as long as your credit score is 580 or above. You can still get an FHA loan with a credit score of 500 to 579, but you’ll need to put forward a down payment of 10%. FHA loans do require you to purchase private mortgage insurance.

Conventional 97 Loans

Federal enterprises Fannie Mae and Freddie Mac now offer a 97% loan-to-value homebuying program. That means you can get a mortgage with a 3% down payment for the same rate or lower as you’d get with a traditional 20% down payment.

Conventional 97 loans are available to buyers who have not owned homes in the past three years and who are borrowing $510,400 or less. Rates are slightly higher than rates on other Fannie Mae loans, but the overall cost of borrowing is lower than what is traditionally offered with low down payment borrowing programs.

Another Option for Experienced Homeowners

First-time homeowners aren’t the only ones who might need some help with a down payment. Sometimes the bulk of your assets are tied up in your current home’s equity, and it can be hard to liquidate that equity without taking on a new loan.

Fortunately, there’s EasyKnock’s Sell and Stay program, which lets you sell your existing home and collect on your equity. You stay in your home as a tenant, paying rent to EasyKnock until you’re ready to repurchase your home or move.

With EasyKnock, you can cash out your equity and use it as a down payment on your next home without being rushed into buying again. You're welcome to stay in your current home as long as you’d like, provided you keep paying rent, and move when you’ve found the perfect place.