What zero-down mortgages actually are and who offers them

A zero-down mortgage lets you borrow the full purchase price of a home without putting money down upfront. You still pay closing costs (usually 2 to 5 percent of the loan amount), but you do not need to save a lump sum before you start the process. The lender covers 100 percent of the home's price.

Three main sources offer these loans: the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA). Each has different rules about who can borrow, what kinds of homes may have access to, and where you can buy. Some private lenders also offer zero-down conventional mortgages, though these are less common and usually require a higher credit score or other compensating factors.

The trade-off for no down payment is that you will pay more over the life of the loan. Without a down payment, your monthly payment is higher, and you may pay mortgage insurance (a monthly fee that protects the lender if you stop paying). This insurance does not build equity in your home—it is pure cost.

Key Takeaways

  • FHA loans require a 580 credit score minimum and charge mortgage insurance for the life of the loan if you put down less than 10 percent.
  • VA loans are only for military members, veterans, and some surviving spouses, and they charge a one-time funding fee instead of monthly mortgage insurance.
  • USDA loans are for rural and some suburban areas and are limited to borrowers with moderate incomes.
  • You still pay closing costs (typically 2 to 5 percent of the loan amount) even with zero down, so you need some cash on hand.
  • Monthly payments on zero-down loans are higher than on loans with a down payment because you are borrowing more money.

FHA loans: The most common zero-down option

FHA loans are backed by the Federal Housing Administration and are the most widely available zero-down mortgages. Most lenders offer them. You need a credit score of at least 580 to may have access to, though some lenders require 620 or higher. Your debt-to-income ratio (the percentage of your monthly income that goes to debt payments) usually cannot exceed 43 percent, though some lenders go up to 50 percent if you have other strengths in your process.

The catch with FHA loans is mortgage insurance. If you put down less than 10 percent (which includes zero down), you pay mortgage insurance for the entire life of the loan. This insurance typically costs 0.55 percent of your loan amount per year, added to your monthly payment. On a $300,000 loan, that is roughly $165 per month. You cannot remove this insurance even after you build equity.

FHA loans work on single-family homes, townhouses, and some condos. The home must be your primary residence (where you live most of the year). You cannot use an FHA loan to buy an investment property or a vacation home.

VA loans: For veterans and active-duty service members

VA loans are exclusively for military members on active duty, veterans, and some surviving spouses of service members who died in service or from service-related injuries. If you are may be able to access, a VA loan is usually the best zero-down option because it has no monthly mortgage insurance.

Instead of monthly insurance, VA loans charge a one-time funding fee paid at closing. This fee ranges from 1.4 to 3.6 percent of the loan amount depending on your military branch, whether this is your first VA loan, and how much you are putting down. A surviving spouse with a service-connected death may pay no funding fee. You can roll the funding fee into your loan balance, so you do not need to pay it upfront in cash.

VA loans have no credit score minimum set by the VA itself, though individual lenders typically require 620 or higher. There is no debt-to-income limit, though lenders usually want to see a ratio below 41 percent. The home must be your primary residence. You can use a VA loan to buy a single-family home, condo, townhouse, or manufactured home.

USDA loans: For rural and some suburban buyers

USDA loans are backed by the U.S. Department of Agriculture and are designed for borrowers buying in rural areas and some suburban communities outside major cities. The USDA publishes a map showing which areas may have access to; you can search by address on their website. These loans have no down payment requirement and no monthly mortgage insurance.

Instead of mortgage insurance, USDA loans charge a may provide fee—typically 1 percent of the loan amount, paid at closing. Like the VA funding fee, you can roll this into your loan balance. You need a credit score of at least 580, though most lenders require 620 or higher. Your debt-to-income ratio usually cannot exceed 41 percent, though some lenders go to 43 percent.

Income limits explore. The maximum income varies by county and family size, but generally ranges from $75,000 to $110,000 for a family of four. You can check the limit for your specific county on the USDA website. The home must be your primary residence and cannot be in an urban area.

Closing costs you still need to pay

Zero down does not mean zero cost. You still pay closing costs, which typically run 2 to 5 percent of the loan amount. On a $300,000 home, that is $6,000 to $15,000. Closing costs cover the appraisal, title search, title insurance, attorney fees, recording fees, and lender fees.

Some programs allow the seller to pay part or all of your closing costs as a concession during negotiation. FHA allows sellers to cover up to 6 percent of closing costs. VA allows up to 4 percent. USDA allows up to 3 percent. This is negotiated when you make an offer, not may provide. You can also ask the lender about rolling closing costs into the loan, though this increases your monthly payment and the total interest you pay.

Before you start house hunting, save enough to cover closing costs. If you cannot cover them and the seller will not pay them, you will not be able to close on the loan.

How your credit score and debt affect approval

Lenders use your credit score and debt-to-income ratio to decide whether to approve you. Your credit score reflects your history of paying bills on time. A higher score (usually 650 or above) makes approval easier and may lower your interest rate. A lower score (580 to 619) is possible but often means a higher interest rate and stricter requirements on other parts of your process.

Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income. This includes car loans, student loans, credit cards, child support, and the new mortgage payment. If you earn $5,000 per month and pay $1,500 in existing debts, your ratio is 30 percent. Most programs want this below 43 percent, though some allow higher ratios if you have compensating factors like a large savings account or a co-signer.

Before you explore, check your credit report at annualcreditreport.com (the only free, official source). Look for errors and dispute them if you find any. Pay down credit card balances if possible—this lowers your debt-to-income ratio and can improve your score. Do not open new credit accounts or make large purchases right before explore, as these actions can lower your score.

The real cost of borrowing without a down payment

A zero-down loan costs more than a loan with a down payment because you are borrowing more money and paying interest on a larger balance. On a $300,000 home, a 20 percent down payment ($60,000) means you borrow $240,000. With zero down, you borrow $300,000. Over a 30-year loan at 7 percent interest, that extra $60,000 costs roughly $119,000 in additional interest.

Add mortgage insurance (if you have an FHA loan) and the cost gap widens. An FHA borrower with zero down pays roughly $165 per month in insurance on a $300,000 loan. Over 30 years, that is about $59,400 in insurance alone—money that does not reduce what you owe.

The benefit of zero down is that you can buy a home sooner instead of spending years saving. If you plan to stay in the home for 10 years or more, the higher cost may be worth it. If you might move or refinance within 5 to 7 years, the extra cost may outweigh the benefit. Run the numbers with a lender to see the actual monthly payment and total cost for your situation.

Frequently Asked Questions

Can I use a zero-down loan to buy a second home or investment property?

No. FHA, VA, and USDA loans all require the home to be your primary residence—the place where you live most of the year. You cannot use them for vacation homes, rental properties, or homes you plan to occupy part-time. Conventional loans with zero down exist but are rare and typically require a higher credit score and other compensating factors.

What happens if I cannot afford the closing costs?

Ask the seller to pay them as part of your offer. FHA allows sellers to cover up to 6 percent of closing costs, VA up to 4 percent, and USDA up to 3 percent. If the seller will not pay and you cannot cover them, you cannot close. Some lenders allow you to roll closing costs into the loan, but this increases your monthly payment and total interest.

Can I remove mortgage insurance from an FHA loan later?

If you put down less than 10 percent (including zero down), mortgage insurance stays for the life of the loan and cannot be removed. If you put down 10 percent or more, you can remove it after 11 years. This is one reason some borrowers save for a small down payment instead of going to zero.

Do I need a co-signer for a zero-down loan?

Not necessarily. FHA, VA, and USDA loans do not require a co-signer. However, if your credit score is low or your debt-to-income ratio is high, a co-signer with stronger finances can help you get approved or receive a better interest rate. The co-signer is equally responsible for the loan.

What is the difference between a zero-down loan and a low-down-payment loan?

A low-down-payment loan typically means 3 to 5 percent down. With 3 to 5 percent down on an FHA loan, you still pay mortgage insurance, but you can remove it after 11 years if you put down at least 10 percent. With zero down, the insurance is permanent. A low down payment also means a slightly lower monthly payment and less total interest paid over the life of the loan.