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Maurie Backman is a personal finance writer who covers topics ranging from Social Security to credit cards to mortgages to REITs. She also has an editing background and appears on live podcasts to talk about financial matters.
Buying a home is one of the biggest -- and most exciting -- financial decisions in life. But what if you can cover the monthly costs of owning a home, but don't have money for a down payment? It is possible to buy a house with no down payment. Read on to find out how.
Yes -- but not with a conventional mortgage (usually). Here are some of the ways you can get a mortgage with no down payment:
For a conventional loan, you generally need a 20% down payment. Some lenders accept a lower down payment -- 10% or even 5%. If you don't have funds available for a down payment, look at different loan products that help you buy a home with no money down.
RELATED: Need to start saving for a down payment? Check out The Ascent's guide to the best savings accounts.
If you don't have money for a down payment, consider these home loan options.
A USDA loan allows you to buy a home with no down payment. To qualify, you must be a low-income borrower buying a home in a designated rural area. The home must be your primary residence, and your monthly mortgage payment (including principal, interest, insurance, and taxes) can't exceed 29% of your monthly income. If you think you're eligible for a USDA loan, shop around with several USDA lenders to see what offers you receive.
If you're a U.S. veteran or are the surviving spouse of a veteran, you may be able to get a VA loan. VA loans allow you to buy a home with no down payment, and often have lower interest rates than conventional loans. You pay a funding fee to get a VA loan that totals 1.4% to 3.6% of the loan amount, but you get the flexibility to buy a home without putting money down at closing. It pays to shop around and see what VA loan rates several lenders offer.
Getting a medical degree is expensive, and doctors often pay off medical school loans well into their 20s or 30s. Many medical professionals have a hard time coming up with money for a down payment on a home.
If you're a doctor, you may qualify for a physician loan, which may allow you to buy a home with a low down payment or no down payment. Some lenders who offer conventional mortgages also offer physician loans, so it pays to look around and see what offers you're eligible for. One great thing about physician loans is that they generally don't charge private mortgage insurance. Also, some physician loan programs don't count medical school debt against applicants.
Credit unions are nonprofit institutions similar to banks that loan money to members. Some credit unions offer mortgages with no down payment, although they typically require that you have an established membership to apply. The upside of a credit union mortgage is that you might pay a lower interest rate than you would with a more traditional lender. The downside is that finding a credit union loan that doesn't require a down payment can be challenging.
Getting a home loan with no down payment may seem like a good thing, but there are drawbacks. Here's what to know.
A no-down-payment mortgage could make it possible for you to buy a home sooner. If you have a stable job and can cover the cost of owning a home, it could pay to take out a mortgage with no down payment.
On the other hand, if you don't have a down payment yet because you don't have a steady job and your income could dip, you may want to hold off on buying a home until you have more financial stability.
Remember, on top of your monthly mortgage payment, there are additional expenses of homeownership to handle, like maintenance and repairs. While you can use a mortgage calculator to see how much you might spend on principal and interest on a home based on your loan amount, it's important to account for these other costs as well.
If you're ready to buy a home, it pays to shop around with lenders and see what offers you get. If you're new to buying, check out this list of mortgage lenders for first-time home buyers. And if your credit needs work, focus on these mortgage lenders for poor credit.
Buying a home with zero down payment could work out well for you. Just understand the risks and drawbacks before applying for a mortgage with no money down.
Here are some other questions we've answered:
Getting pre-approved for a mortgage loan is an important step in the home buying process. Our experts recommend mortgage pre-approval before you begin looking at houses or deciding on a real estate agent.
There are specific loan types that allow you to get a home loan without bringing any down payments funds to closing. These include VA loans, USDA loans, physician loans, and credit union loans. However, these loans have specific criteria you must meet to qualify. For example, VA loans are for U.S. veterans or their surviving spouses only, while physician loans are uniquely designed for doctors.
It can be. The more money you borrow in your mortgage, the more interest you pay over the life of your loan. Plus, you may pay added fees for a no-down-payment loan.
To buy a home with no down payment, see if you qualify for a loan that allows for it, like a VA loan or USDA loan. Reach out to several lenders within that loan category.
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