- Apply for a Zero Money Down VA Loan or USDA Loan
- Use Downpayment Assistance to Cover the Downpayment
- Ask for a Down Payment Gift from a Family Member
- Get the Lender to Pay Your Closing Costs (Lender Credits)
- Get the Seller to Pay Your Closing Costs
A VA loan is a mortgage insured by the Veterans Administration, making it easier for veterans to qualify for home loans. VA loans are issued by private lenders but feature laxer requirements because a federal government department insures them. That includes more flexible credit and income requirements and a zero money-down loan option. Only veterans can qualify, but if you served in the military, you could get a home loan without a down payment or the need for private mortgage insurance.
VA loans have no specific minimum credit or down payment requirements, although many lenders like to see a score of at least 580. Applicants will still have to fulfill the necessary income requirements set by the lender to prove that they can afford the mortgage. But all applicants must obtain a certificate of eligibility from the VA to verify their service.
To qualify, applicants must have served:
- 90 days in active wartime service
- 180 days in active peacetime service
- 6 years in the National Guard
The spouse of a veteran who died in active duty or due to an injury related to military service may also qualify.
A USDA loan is insured by the US Department of Agriculture, which offers affordable loan programs to eligible rural homebuyers. Like a VA loan, a USDA loan provides better interest rates and down payment requirements because the federal government backs the loan. One of the most attractive benefits is a zero-down mortgage. But there are geographic restrictions and other qualifications that applicants must meet to be approved. So, if you live in a major city, this won’t be an option.
USDA loans also have no down payment or credit requirements, although lenders like to see at least a 620-credit score. But the borrower must also meet specific income requirements to qualify.
The USDA sets the following requirements for a zero-down loan:
- Must be a legal US resident
- Must prove creditworthiness (620+)
- Must maintain a dependable household income matching 115% of the area median income or lower
- Must have a primary residence in a rural area
In addition to income and residence requirements, the USDA sets limits on the type of property you can buy with the loan, including single-family homes, manufactured homes, condos, townhouses, or short sales. It can also be an existing home or new construction.
No Money Down Loan Qualifications
Minimum Credit Score
Must be a veteran with a certificate of eligibility
Must have a primary residence in a rural area
If you don’t qualify for a VA or USDA loan, you still have a few options to buy a house with no money down. One of the most common is down payment assistance, which helps first-time home buyers afford a loan while paying little to nothing out of pocket. Down payment assistance is available through various programs and non-profits through grants and loans.
Most local and state housing authorities have a downpayment assistance program, but they are also available through non-profits and other groups. Every program has different requirements that vary from state to state, but typically they are reserved for first-time home buyers. Qualifications are based on your income and credit history and may or may not cover the entire down payment.
Down payment assistance is offered in multiple different forms, including:
- Forgivable loans
- Deferred payment loans
- Low-Interest loans
- Matched savings programs
There are many great down payment assistance programs available, so if you plan on going this route, you should do your research to find the best program possible.
If you don’t qualify for down payment assistance or a zero-down loan program, you can also always ask a family member for a down payment gift. There’s nothing wrong with asking for help, especially if you put it toward a significant investment like purchasing a home.
Not everyone has family they can rely on for such a large investment, but it can’t hurt to ask if you do. Or perhaps you have multiple family members who would be willing to contribute small portions. If you’re not comfortable asking for a gift out of the blue, maybe you could forgo a Christmas present or birthday gift and request cash instead. If you let your friends and family know that you’re saving for a down payment, they may be extra generous.
If you have some money saved but can’t cover both the down payment and the closing costs, you still have options. For instance, it’s possible to have your lender help you with some of the closing costs, so you can focus on making the down payment. Also known as lender credits, this can be an excellent way to buy a home without worrying about paying an additional 3-6% of the sale price.
But unlike your friends and family, a lender will not cover these costs for free. Instead, they will charge you a higher interest rate and provide you with the funds you need to close. So, you will be paying for it over the life of the loan, just not all at once. You must still make a cash down payment to qualify for the loan in the first place, so if you have no money saved, this isn’t a feasible option.
You should avoid this strategy if you can’t comfortably pay the higher interest rate, or it would mean paying for more than the value of the credits over time. But in the exemplary scenario, lender credits can give homebuyers some financial relief at closing to focus on the down payment, which can help many afford a loan sooner.
Another potential option is to have the seller pay your closing costs. Also known as seller’s concessions, a seller may agree to contribute toward some or all of the buyer’s closing costs as an added incentive. This usually only occurs in a strong buyer’s market, where the seller wants to move fast, and there aren’t many qualified buyers looking to make a purchase. Or, if the property needs minor repairs, the seller may offer concessions so the buyer can fix them rather than delay the closing.
The best part about seller concessions is that your loan will be unaffected, unlike lender credits, and you don’t have to pay them back. But they can be hard to negotiate unless the seller is highly motivated to sell. Plus, you will still be on the hook for whatever down payment the lender requires.
It's possible to buy a house with no money, but you'll need to either qualify for a zero down payment mortgage or do a bit of extra negotiating to get your closing costs covered. With a traditional mortgage, lenders like to see applicants put down at least 20%, which may be tens of thousands of dollars, even for the cheapest homes. It can be tough to save that much, and buying a house with no money down by using a zero-down loan or getting down payment assistance is a great alternative.
Can You Buy a House with No Money and Bad Credit?
It depends on how bad your credit is. Technically there are no credit requirements for a USDA or VA loan. But lenders typically have their own credit thresholds. So, if your credit score is below 580 for a VA loan or 620 for a USDA loan, you may have a more challenging time getting approved. But it is possible if you can find a lender willing to issue the loan.
Can You Buy a House with No Money Down?
You can buy a house with no money down, but only if you qualify for a VA or USDA loan. It is far more difficult if you are looking for a conventional mortgage. There are options available to help you reduce your closing costs and offset some expenses, but most lenders will require at least 3% to close.
How Hard is It to Buy a House with No Money?
If you qualify for a no-money down VA or USDA loan, it’s as simple as applying for any mortgage loan, except you will be required to provide additional paperwork confirming that you qualify for the program. But if you do not qualify for either of these programs, it will be much harder unless you find a down payment assistance program to help you.