What Is a Zero-Down Mortgage? Pros, Cons, and How to Qualify

Can you get a mortgage with zero down? Yes, certain types of mortgage loans require zero down, but not everyone will qualify. And even if you do qualify, it might not be something you want to do. While a zero-down mortgage can allow you to buy a home sooner because you don’t have to save for a down payment, there are downsides—including higher monthly mortgage costs.

Let’s explore what exactly a zero-down mortgage is, how to get one, and whether it’s the right option for you. 

What is a zero-down mortgage?

A zero-down mortgage (also called a no-down-payment mortgage) is a home loan that offers 100% financing. Your loan will cover the entire cost of the property. You’ll pay nothing up front beyond closing costs.

Most lenders require a down payment—often at least 3–5% or more of the purchase price. For a $300,000 home, that would be a minimum of $9,000 to $15,000. That’s a significant amount for a first-time or low-income homebuyer to save, which is why a zero-down mortgage can be an attractive option.

One important note: zero-down mortgages only apply if you are using one to purchase a new primary residence. If you want a zero-down mortgage to buy a second home (like a vacation home or rental property), you’ll need to explore other options. The minimum down payment for a second home is typically at least 10%. 

Common zero-down mortgage loans 

To qualify for a zero-down mortgage, you must meet specific criteria. In general, you’ll need a credit score of at least 620 and a debt-to-income (DTI) ratio of no more than 41%.[1] The property must also be your primary residence.

Here’s how to get a zero-down mortgage through some common loan options. 

USDA loans

The U.S. Department of Agriculture (USDA) offers two loan programs that require zero down payment: the Single Family Housing Guaranteed Loan Program and Single Family Direct Home Loans.[2][3]

Both programs aim to help low- and moderate-income homebuyers purchase a home. You’ll pay closing costs, an upfront guarantee fee of 1% of the loan amount, and an annual guarantee fee of 0.35%.

Here’s what you need to qualify for a USDA loan:

• You must purchase a property in an eligible rural area.[4]
• The home must be a single-family residence and your primary residence.
• Your DTI ratio for housing costs must be 29% or lower, depending on the lender.
• You’ll need to work with your local USDA Rural Development office or an approved lender.[5][6]

VA loans

The Department of Veterans Affairs (VA) has a zero-down mortgage program for members of the military.[7] These loans require you to pay closing costs plus a funding fee, which can be 1.25–3.3% of the loan amount. Unlike the USDA loan, there’s no ongoing fee.

Here’s what you need to qualify for a VA loan:

• You must be an eligible veteran, active-duty service member, a member of the National Guard or Army Reserve, or a veteran’s surviving spouse.
• The home must be your primary residence.
• The loan amount can’t exceed the property’s appraised value.
• You must move into the home within a reasonable timeframe, typically 60 days from closing. 

Other zero-down options

If you don’t qualify for USDA or VA zero-down mortgage loans, you could still be eligible for one of these options:

• Some credit unions, like Sunmark Credit Union in New York, offer zero-down mortgages.[8] Be sure to check with your local lenders for similar offers or programs.
• Guild Mortgage is an online lender that offers zero-down mortgages.[9] It has more than 740 branches in 46 states.
• Those in the medical field with school debt may qualify for a physician mortgage.[10] These require no down payment and allow higher DTI ratios.
• A down payment assistance (DPA) program can offer cash grants, tax credits, or loans to help you cover the down payment. Learn whether DPA is available in your area and see if you qualify.[11]

Is a zero-down mortgage right for you?

Zero-down mortgage loans can be an excellent option for certain buyers, but they also have some downsides and potential risks. Remember, not everyone is eligible, and not every situation is ideal for bypassing the down payment.

If you qualify, a zero-down mortgage could make sense if you have limited savings or want to use them for closing costs, moving expenses, maintenance and repairs, or other costs that come with homeownership.

You might also consider a zero-down mortgage if you can afford a higher monthly payment. Suppose you’re buying a $300,000 home. You’ll be financing the entire thing, rather than, say, $285,000 if you put 5% down. At today’s rates and on a 30-year loan, your monthly payment would be about $100 higher ($2,230 versus $2,131).

But if you’re willing to take the time to save up for a down payment, you could lower your monthly payment — and reduce what you’ll pay over the loan’s lifetime. You could also avoid the risks of a zero-down mortgage if you have a healthy savings account.

Consider the local housing market, too. If home prices are steadily rising, getting a zero-down mortgage could be a smart move. But if prices are falling, you could be underwater on your loan in a year. 

Pros of getting a zero-down mortgage

• You’ll save money upfront. With no down payment required, you’ll save thousands of dollars out of pocket and can instead roll it into your monthly mortgage payments.
• You can buy a house sooner. Depending on your situation, it could take years to save enough money for a down payment on a home. A zero-down mortgage helps you become a homeowner much faster.
• You can keep your savings. Buying a home is expensive, and new buyers often overlook the total cost of ownership. With zero down, you can put your savings toward moving, maintenance, repairs, or other expenses. 

Cons of getting a zero-down mortgage

• You’ll get no initial home equity. Your down payment is immediate equity in your home. Without it, you could end up owing more than your house is worth. If you have to sell after only a year or two, you may lose money on the deal.
• You’ll pay higher interest rates. Zero-down mortgages often come with a higher interest rate. A high interest rate combined with a larger mortgage balance means you’ll pay more in interest over the life of the loan.
• Your monthly mortgage payment will be higher. Because you’re borrowing more money — and at a higher interest rate — you’ll have a higher monthly payment.
• You’ll pay added fees. While USDA and VA loans are attractive options for low- to moderate-income homebuyers, both come with added fees. This significantly increases the cost of the loan over its lifetime. 

Alternatives to zero-down mortgages

A 20% down payment might be recommended, but it’s certainly not required. In 2024, the average down payment for first-time homebuyers was 9% of the sale price.[12]

So, if you don’t qualify for zero-down mortgage loans, there are plenty of alternative property loans that require 10% down or less. Here are some to consider.

FHA loan

A Federal Housing Administration (FHA) loan has less strict borrowing criteria than some alternatives. If your credit score is 580 or above, you’re only required to put 3.5% down.

However, you must pay an upfront mortgage insurance premium (MIP) of about 1.75% of your loan amount. You’ll also have an annual MIP payment of approximately 0.15–0.75% of the loan that will last for the lifetime of the loan. 

Conventional mortgage

First-time or low-income homebuyers are often eligible for conventional loan programs requiring just 3% down.[13] These programs are backed by Fannie Mae and Freddie Mac and include the following:

• Conventional 97
• HomeReady
• Home Possible
• HomeOne

Some mortgage lenders will only require a 1% down payment. For instance, with Rocket Mortgage’s ONE+ program, the lender pays 2% of the required 3% down payment on a HomeReady or Home Possible loan. You would then pay the remaining 1%. 

Good Neighbor Next Door (GNND) program

This program, run by the U.S. Department of Housing and Urban Development (HUD), is for certain public service professionals — full-time law enforcement officers, pre-kindergarten through 12 th grade teachers, firefighters, and emergency medical technicians (EMTs) — who plan to buy a home in a qualifying area.

The minimum down payment is just $100, and you could get a discount of up to 50% of the home’s purchase price. 

First-generation homebuyer grants

Some states offer additional programs to help first-generation homebuyers with down payments or closing costs. If you’re the first in your family to purchase a home, check to see if this program is available in your state. Some programs accept applications continuously, while others are only open for a limited period.

Learn more about first-time homebuyer programs, including state-specific initiatives that provide down payment assistance. 

Rent-to-own home

A rent-to-own agreement could be a good option if you don’t have the savings for a down payment and can’t qualify for a mortgage due to poor credit. In this situation, you can rent a home until you’re able to buy it.

Generally, a portion of your monthly rent payment is put toward the future purchase of the house, allowing you to build equity over time. You’ll also have to pay a non-refundable option fee up front to secure the option to buy the home later.

You could qualify for a rent-to-own home with a credit score as low as 500. You’ll also lock in today’s purchase price, which is beneficial if you live in an area where home prices are increasing. But your monthly rent may be higher than a typical rental agreement, and you risk losing money if you can’t qualify for a mortgage after the rental period. 

Is a zero-down mortgage worth it?

While a zero-down mortgage may sound like an ideal way to get into your dream home sooner, there are some risks and it’s not the best financial choice. You might save money up front, but you’ll pay more in the long run.

If you’re not in a hurry to move, taking time to save up for a small down payment can help you pay less each month and for years to come. In fact, choosing a low-down-payment mortgage can be one of the cheapest ways to buy a house.

If this is an option you’d like to explore, it’s helpful to work with a real estate agent who specializes in zero- or low-down payment mortgages. Clever Real Estate can connect you with a local realtor to help you find homes in your budget and help you explore financing options for your specific situation.