Can You Buy a Home Without a Down Payment?

It is possible for buyers to buy a home without a down payment or with a low down payment requirement.

Buyers do not technically need to put 20% down on the homes they’re looking to purchase. In fact, qualifying buyers can land a home purchase with no down payment required — or, with a reduced down payment at an affordable rate.

Informing yourself on the options available regarding your home financing can help you make the best decisions, curating your home purchase to your specific needs.

3 Ways to Buy a Home Without a Down Payment

Here are a few of the options for buyers that are looking to buy a home without a down payment.

#1. Apply for a Zero-Down Mortgage Loan with the VA or USDA

Both repeat home buyers and first-time buyers may be eligible for mortgages without down payment requirements from the VA or USDA.

These loans cover 100% of the purchase price of the home, meaning there are no upfront costs to pay at closing toward the down payment.

VA Loan

The Veterans Association, or VA, offers home buying assistance to military members and their families.

To be eligible for full financing from the VA, buyers must be either veterans, active-duty service members, or service personnel that have been honorably discharged. Spouses of these qualifying military members are also eligible for a VA loan.

Besides allowing buyers to buy a home without a down payment, the VA loan maintains flexible credit score minimums and does not require any mortgage insurance policies. VA loans also have no maximum funding amount.

USDA Loan

The United States Department of Agriculture, or USDA, offers a Rural Housing Loan for low-to-moderate-income buyers purchasing homes in rural and suburban areas. Unlike other loan assistance programs, the USDA loan does not maintain a maximum home purchasing price.  

In order to qualify for the USDA loan, buyers must have a household income that is near or below the median household income rates in the area where they’d like to purchase a home.

#2. Combine a Low-Down-Payment Loan with  a Down Payment Assistance Program

Buyers who do not qualify for the VA or USDA loans can still manage to buy a home without a down payment.

The best way to do so is by applying for a loan with a reduced down payment and then leveraging additional assistance programs to cover the down payment.

Step One: Secure a Loan with a Low Down Payment Requirement

Here are a few examples of loan options with comparatively low down payment requirements.

• FHA Loans — 3.5% down required for buyers with a 580 credit score
• Fannie Mae’s HomeReady Mortgage — 3% down for qualifying buyers
• Freddie Mac’s Home Possible Loan — 3% down for qualifying buyers
• Conventional Loan 97 — 3% down, which can be covered through gifted funds
• Piggyback Loans (80/10/10) — 10% required for buyers with a 680 credit score minimum
• Conventional Loan — 5% down with a credit score of 620 or higher
  

Step Two: Find the Right Down Payment Assistance Program

In 2021, there are more than 2,000 down payment assistance programs available across the U.S.

Down payment assistance comes in the form of loans, grants, deferred loans, and forgivable loans. If you’d like to learn more about down payment assistance programs, speak to your loan officer.

They will be able to help you find local opportunities to assist you with your down payment costs. Speaking with your lender will also ensure that you’re pursuing a down payment assistance program that can be combined with your mortgage loan.

#3. Receive a Personal Gift or Loan to Cover the Down Payment

Asking the people close to you, like trusted family members and friends, to provide you with a personal gift of the money required to cover your down payment is another way to buy a home with no down payment costs.

In some cases, such as with the Conventional Loan 97, gifted funds can only be received from a relative. The source of the income needs to be from a legal guardian, spouse, domestic partner, fiancee, or relative by blood or marriage.

Instead of asking for the funds to be gifted, buyers can also ask for a personal loan from someone they know and trust. This option allows buyers to avoid the interest costs associated with borrowing money for their down payments from a bank or financial institution.

If these options are available to you, pursuing them can help you reduce the up-front costs of buying a home. Also, check out all of the programs available at Down Payment Resource - they've done a great job of finding the programs available in your state.

To access more information about mortgages and home buying, review other articles from RealEstateAgents.com.