7 min read Aug 31, 2024

How to Buy a House with No Down Payment in 2024?

Editor
Edited By

Megha Mulchandani

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Editor
Edited By

Megha Mulchandani

Editor, Houzeo
About

Megha M. is an adept content editor well-versed in the intricacies of American market dynamics and economic trends. In her free time, she excels as a versatile theatre artist and public speaker.

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✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home buyers.

Banks currently charge lower than 7.33% interest annually, but most lenders still loan out only up to 90% of your property value. The rest comes from a down payment, which implies that the higher the property value, the higher the down payment. 

But can you buy a house with zero down payment? Yes, you can. VA and USDA loans commonly exempt first-time homebuyers from this requirement. Now if you’re wondering where to find a lender, Houzeo got you covered. 

Our list of mortgage lenders around you is designed to shorten your search and streamline the process. Find a suitable lender, negotiate favorable terms, and take another step closer to moving into your new home today!

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💲Low Down Payment Trends

  • 10% of US homeowners have a mortgage loan with a down payment of just 3% or less.
  • The typical down payment for a first-time home or investment property buyer is lower than 7% of the purchase price.
  • The average down payment on a house in the U.S. was $51,250 as of December 2023.
  • Bank of America, Chase, Citi, and Connexus Credit Union are the top lenders in the United States that offer zero-down payment loans.

How Can You Buy a House Without a Down Payment?

There are multiple government-backed loans through which you can obtain no money down mortgages. Also, lenders and the government share the cost if you are unable to repay your mortgage. Here is how to buy a home with no money down:

  1. Get Pre-Qualified for a Mortgage: Know if you qualify for the conventional, VA, or USDA loan. Know your budget and then apply for a mortgage under the desired loan.
  2. Explore Down Payment Options: If you want to buy a home with no down payment, consider different down payment options. You can consider government assistance programs and gift funds from family.
  3. Apply for Your Chosen Loan: Once you find out your eligibility, submit your loan application form with the chosen loan program.
  4. Find Your Dream Home: Next, explore homes as per your desire and the one that also fit your budget and desired features.
  5. Negotiate Closing Costs: Negotiate with the seller to cover closing costs. Do this in exchange for a slightly higher home purchase price.

No Down Payment Home Loans Options

There are multiple kinds of zero down payment home loans that are backed by the government. Let us discuss the types of loans below:

1. VA Loans 

The U.S. Department of Veterans Affairs offers VA loans as mortgage financing for military members, veterans, and their surviving spouses. It is an attractive option for first-time homebuyers willing to adopt zero-down home loans.

These are backed by the federal government but issued through private lenders. 

Eligibility Criteria

  • Service for 90 straight during a war
  • Active service of 181 consecutive days during peacetime.
  • An experience of not less than 6 years in the National Guard or Reserve or an experience of at least 90 days under Title 32 orders.
  • You must be discharged due to disability during the service.
  • Spouse of a member who died during the time of duty.
  • At least a credit score of 580 points. 

Costs and Fees to Know About

VA buyers need to pay VA funding fees. It’s a mandatory charge that directly funds the Department of Veterans Affairs. If you are a first-time homebuyer with a zero-down or less than 5% loan, you will have to contribute 2.15% of the loan amount. 

If you are not a first-time VA buyer, you will have to pay a VA funding fee of 3.3% for any subsequent use of a VA loan. This is if you decide to pay less than 5%. The below table shows the VA loan funding fees:

Down PaymentFirst-time VA borrower Subsequent VA borrower 
Less than 5%2.15%3.3%
5% or more1.5%1.5%
10% or more 1.25%1.25%

2. USDA Loan 

The United States Department of Agriculture is responsible for providing USDA loans. The government of the USA extends these no-down loans for construction purposes. These loans also encourage infrastructure development in rural and suburban areas. 

3. Good Neighbour Next Door Loan Program

It is a housing initiative under the US Department of Housing and Development. The program caters to police officers, firefighters, and teachers who want to purchase homes at a 50% discount rate. It offers other financial benefits, like:

  • FHA-insured mortgage with a minimum down payment of $100.
  • Trading off repair costs with the mortgage, like an FHA 203(k) loan.
  • Earning a profit by selling the home after living there for at least 3 years.

Piggy Bank Loans

Editor’s Take: Here, you take one big loan and another smaller loan. The second one essentially extends funds for your down payment. As a result, you won’t have to pay for private mortgage insurance.

Pros and Cons of Zero Down Payment

Here are some pros and cons for first-time home buyers to avail zero down home financing:

Advantages

  • It gives you the opportunity to purchase a home without using your entire savings at once.
  • You can buy a home sooner with no money down in comparison to the traditional way of buying a home. 

Limitations 

  • You are more likely to pay more loan interest because of the higher loan amount. 
  • You may not afford as much home as you could if you have put money down.
  • You will have less equity in your home as you will be putting down less money.
  • You may be paying additional fees.

Low Down-payment Mortgage Options

If you do not fit into the no money down home loans criteria, worry not! Here are some low-down payment options for you: 

Fannie Mae HomeReady Loans

The HomeReady program is a conventional loan available to many buyers. Fannie Mae (the Federal National Mortgage Association) provides these loans. Under a HomeReady loan, you need to make a down payment of as little as 3%. 

Note that you will have to trade off this low down payment with mortgage insurance. However, don’t worry, as it is generally at a lower price than other traditional loans.

Freddie Mac HomeOne Mortgage 

Freddie Mac (Federal Home Loan Mortgage Corporation) provides this particular loan. Similar to HomeReady loans, it requires a 3% down payment and minimal mortgage insurance requirements.

Freddie Mac HomeOne mortgage is especially for those who are in search of flexible financing. People who need a single family home such as townhouses and condos can pick up this mortgage. 

Conventional 97% LTV

A conventional 97% mortgage is similar to Fannie and Freddie’s loans. Similarly, a conventional 97% mortgage just needs a down payment of 3%. The difference is that the loan-to-value ratio will be 97%, i.e., lenders will give 97% of the property amount as a loan.

You can take out an FHA loan even if your credit score is as low as 500. However, in that case, you will need to make a down payment of 10%. On the other hand, if your credit score is 580+, then you will need to make 3.5% down.

Bottom Line 

Buying a house with no money down is not a usual norm but it’s possible. It can be a good idea if you qualify for a low- or no-money-down mortgage. You can get the no down payment mortgage with VA loans, USDA loans, or Good Neighbour Next Door Loan Program.

Houzeo can help you find the house of your dreams. As the most trusted home listing company in the USA, Houzeo makes it easy for you to compare the best home-buying options. Its realtors and experts will work towards what’s best for you.

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FAQs

What is the minimum down payment amount for a home loan?

FHA loans offer the lowest down payment of 3.5%. Moreover, the applicant must have a minimum credit score of 580. Other loans that offer mortgage loans at 3% are Freddie Mac HomeOne loans and Fannie Mae HomeReady Loans.

Can I avail of a 100% home loan amount?

No, you can't get a 100% home loan because banks are not allowed to do so. However, you can get 90% or 95% home loans under government backed loans. It is important for banks to establish a margin money on the home loan for security purposes.

What is the drawback of paying a large down payment?

If you pay a higher down payment, you may need to continue saving for longer periods to become a homeowner. Moreover, you may not be having as much available funds in case of emergencies. You will also be required to be more careful with your monthly budget planning.

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