Zero Down Mortgages 2025: How to Buy a Home With No Down Payment
For many homebuyers, especially first-timers, saving tens of thousands for a down payment is an insurmountable challenge.
Fortunately, 20% down is unnecessary. It’s even possible to purchase a home with no down payment.
Key Takeaways
Zero-down mortgages allow buyers to purchase a home without making a down payment.
VA and USDA loans are popular government-backed zero-down options for eligible buyers.
Specialty loans, credit union programs, and lender-specific products may also offer exclusive zero-down options.
Down payment assistance programs, gift funds, and seller concessions are other alternative strategies to consider.
Buyers should weigh the pros and cons of zero-down mortgages, including the potential for higher monthly payments.
What Is a No-Down Payment Mortgage?
A zero-down mortgage, as the name implies, is a home loan that requires no down payment.
No-down payment mortgages allow buyers to finance 100% of the home’s purchase price, eliminating the need to save for a down payment. These mortgages are especially appealing to would-be buyers who may have steady income but limited savings.
While they reduce upfront costs, zero-down mortgages aren’t available to everyone and may cost more on a monthly basis.
Zero-Down Mortgage Options
There are several programs available for buyers looking to purchase a home with no down payment.
VA Loans
VA loans are exclusively available to active-duty service members, veterans, and qualifying surviving spouses. Backed by the U.S. Department of Veterans Affairs (VA), these loans are provided by VA-approved lenders as a benefit of military service.
VA loans are considered some of the best zero-down mortgages on the market. The reasons for this include:
No down payment for eligible borrowers
Competitive interest rates
No monthly private mortgage insurance (PMI) requirement
To qualify, you’ll need a Certificate of Eligibility (COE) and meet service requirements. While VA loans require a funding fee – a one-time upfront payment – it can often be rolled into the loan.
USDA Loans
For buyers looking to purchase a home in rural or suburban areas, USDA loans—backed by the U.S. Department of Agriculture—offer a zero-down payment option.
Key features of USDA loans include:
These loans are intended for low- to moderate-income buyers
The property must be in an eligible rural area
USDA loans often feature lower rates than conventional loans
Physician Mortgages
If you’re a doctor, dentist or other medical professional, you might be eligible for a no-down payment physician mortgage. These provide a workaround for those who expect to earn more money in the future, but might not be able to save for a down payment now due to school debt.
Doctor loans are great for medical professionals because they:
Exclude student loan debt from the debt-to-income ratio
Do not require PMI
Are tailored for professionals early in their careers with high earning potential
Good Neighbor Next Door
The Good Neighbor Next Door program, offered by the U.S. Department of Housing and Urban Development (HUD), provides a 50% discount on home prices for eligible teachers, police officers, firefighters, and emergency medical technicians.
While this isn’t strictly a zero-down option, the required down payment can be as low as $100.
Homebuyers that qualify for the Good Neighbor Next Door loan are required to live in the home as their primary residence for a minimum of three years.
Credit Unions
Some credit unions offer zero-down mortgage options to their members. These loans often come with lower fees compared to traditional banks. They are also known for having competitive rates.
Membership requirements vary, but they’re often tied to your employer, community, or professional organization.
Lender Specific Programs
As part of initiatives to expand homeownership, many lenders have developed their own zero-down mortgage programs.
Some examples at the time of this writing are:
NFM Zero-Down Mortgage
These programs may have specific criteria, such as credit score requirements or geographic limitations. This criteria can change, so check with your lender for the latest information and requirements.
When comparing lenders for your zero-down mortgage program, here are some helpful considerations.
First-Time Buyer Requirements: Check if the lender has restrictions based on homebuyer status.
Programs Offered: Confirm the lender provides options you qualify for, as offerings vary.
Down Payment Assistance: Verify if the lender offers or works with down payment assistance programs.
Customer Service: Research reviews on platforms like the Better Business Bureau or Trustpilot, and seek recommendations from family and friends for local lenders.
Credit Score Minimums: Ensure the lender’s credit score requirements align with your profile.
Lenders create their own zero-down mortgage programs to expand their lending footprint in certain regions or tap into a new customer base. Whatever the reason, homebuyers benefit by seeking out and taking advantage of these opportunities.
Community Seconds Programs
Community Seconds programs provide second mortgage options to help cover down payments or closing costs.
A Community Seconds mortgage is a down payment assistance program from Fannie Mae (with Freddie Mac offering a similar program called Affordable Seconds). These programs enable approved third parties to provide funds for down payment or closing costs, secured by a second mortgage that is subordinate to your primary mortgage.
Other Strategies for Buying a Home with No Down Payment
If you don’t qualify for a zero-down mortgage, there are additional strategies to minimize your upfront costs.
Down Payment Assistance Programs
Many state and local governments offer down payment assistannce (DPA) programs, which provide grants or low-interest loans to cover the down payment. These programs are often geared toward first-time buyers or those with low to moderate incomes.
Gift Funds
Gift funds from family members or other sources can be used as a down payment for many loan programs, including FHA and conventional loans. Be prepared to provide documentation to the lender showing the funds are a gift and not a loan.
Seller Concessions
In some cases, sellers may agree to cover a portion of the buyer’s closing costs, freeing up funds that can be redirected toward the down payment. Seller concessions are typically negotiated during the offer process and may be capped depending on the loan type.
Zero-Down Alternatives: Low-Down Payment Mortgages
If you’re unable to qualify for a zero-down mortgage, low-down payment options can still make homeownership more accessible. You may be able to combine down payment assistance programs with the following loans to create your own zero-down mortgage.
FHA Loans
Federal Housing Administration (FHA) loans require as little as 3.5% down and are especially popular with first-time buyers. FHA loans’ popularity is due to their flexible underwriting requirements and their ability to easily pair with down payment assistance.
Remember that FHA loans include upfront and annual mortgage insurance premiums, which can raise both your total loan amount and monthly payments.
3% Down Conventional Loans
Both Fannie Mae and Freddie Mac offer versions of a low-down payment mortgage. These loans are designed for first-time buyers (or buyers that haven’t owned a home in the previous three years) with just 3% down.
Fannie Mae’s program is known as the Conventional 97 loan. Freddie Mac offers a similar program called the HomeOne mortgage.
Both of these conventional loans are ideal for mortgage borrowers with good credit.
Freddie Mac Home Possible Loans
Home Possible loans offer low-down payment options for buyers with limited income. Income limits for this program vary depending on property location.
Some features of Home Possible include:
Down payments as low as 3%
Reduced PMI costs
Flexible underwriting requirements
HomeReady by Fannie Mae
HomeReady loans cater to low- to moderate-income buyers and allow for a 3% down payment.
A few of the benefits of HomeReady include:
Flexible underwriting standards and loan terms
Acceptance of non-traditional income sources (e.g., rental income)
Reduced PMI premiums
Piggyback Loans
A piggyback loan involves taking out a second mortgage (a home equity loan or a home equity line of credit) to cover part of the down payment. For example, an “80-10-10” loan structure includes an 80% primary mortgage, a 10% second mortgage, and a 10% down payment.
In addition to helping home buyers avoid paying PMI, piggyback loans also act as a workaround when purchasing a home that’s above conforming loan limits. By splitting the cost into two loans, mortgage borrowers can bypass the higher rates and stricter requirements of jumbo loans.
Pros of Zero-Down Mortgages
By now, you’ve seen how zero-down mortgage can help home buyers with limited funds for a down payment. Other advantages include:
Eliminates upfront costs: Makes homeownership more accessible.
Preserves savings: Allows buyers to retain cash for emergencies or future expenses.
Encourages faster entry into the market: Helps buyers take advantage of favorable market conditions.
Cons of Zero-Down Mortgages
Like anything else, there’s always downsides. It’s important to weigh the negatives of a zero-down mortgage.
Higher monthly payments: Financing 100% of the purchase price means larger loan balances.
Potential for negative equity: A small drop in property value could leave you owing more than the home is worth.
Stricter requirements: Many zero-down programs have eligibility restrictions.
Other Costs to Keep in Mind
Don’t mistake a zero-down mortgage to mean there aren’t other costs to consider. For example, most mortgages come with closing costs that range from 2% to 5% of the home’s purchase price.
While the appraisal is part of these costs, home inspection fees aren’t. Be sure to consider the home inspection fee when estimating your cost considerations. And be careful about skipping the home inspection. A home inspection may uncover potential issues that could add up to costs that would far exceed the inspection fee.
Is No Money Down the Right Option for You?
Zero-down mortgages offer a valuable opportunity for aspiring homeowners to break into the market without the financial hurdle of a large down payment. With the right loan program or strategy, you can make your dream of homeownership a reality.
When deciding if a zero-down mortgage is right for you, consider factors such as your income stability, future financial goals, and the potential for higher monthly payments.
Consulting with a mortgage lender about the options available to you can help determine your best path forward. Start here.
