Are No-Down-Payment Mortgages a Good Idea?

Saving for a down payment is often the biggest hurdle to buying a home. Even a 3% down payment on a $400,000 home is $12,000, and that’s before closing costs. A no-down-payment mortgage removes that hurdle if you qualify. But the trade-off can be a bigger loan, more interest, and less cushion if home values drop.

What is a no-down-payment mortgage?

It’s a mortgage that lets you finance the full purchase price, meaning no down payment. Most other loans require cash up front:

• Conventional mortgages usually require at least 3% down. Putting 20% down lets you skip private mortgage insurance.
• FHA loans are insured by the federal government and allow as little as 3.5% down.

Read more >> How to Buy a House With Low Income

Types of no-down-payment mortgages

There are two main types of zero-down home loans, both backed by the federal government. If you default, the federal agency that insures the loan covers part of the lender’s losses. That lowers the lender’s risk, allowing them to offer looser requirements.

VA loans

VA loans are guaranteed by the U.S. Department of Veterans Affairs. You may be eligible if you’re:

• A veteran who meets the service requirements
• An active-duty service member
• A National Guard or Reserve member
• A surviving spouse who meets the VA’s requirements

VA loans don’t require a down payment or private mortgage insurance. Most borrowers pay a one-time funding fee instead: 2.15% of the loan on first use with less than 5% down.

USDA loans

The U.S. Department of Agriculture backs two zero-down loans for homes in eligible rural and suburban areas:

• Guaranteed loans come from private lenders for households under USDA’s moderate-income limit. USDA sets no minimum credit score, but lenders can require one.
• Direct loans come from USDA itself for those at or below the area’s low-income limit. The rate is 5.750% as of October 2026. With payment assistance, it can drop as low as 1%.

Pros of no-down-payment mortgages

• You can buy sooner. You skip the years it takes to save a down payment.
• You keep your savings. Money you’d have put down can stay in your emergency fund or go toward high-interest debt.

Cons of no-down-payment mortgages

• You pay more each month. You’re borrowing the full price, so every payment is bigger than it would be with money down.
• You’ll pay more interest. On a $400,000 home at today’s average 7.40%, putting 10% down saves about $277 a month and $60,000 over the loan.
• You’ll start with little or no equity. Equity is what your home is worth minus what you owe. VA and USDA usually add the upfront fee to your loan, so you can owe slightly more than the home’s price on day one. If you sell early, the sale may not cover the loan and selling costs.

Who should consider a no-down-payment mortgage?

It may be a good fit if:

• You qualify for a VA loan, or for a USDA loan in an area you want to live in.
• Your income comfortably covers the higher payment.
• You plan to live in the home long enough to build equity.

It might not be your best option if:

• The monthly payment would stretch your budget.
• Your income is unpredictable and you don’t have savings to fall back on.
• You could cover even a small down payment, which would lower your payment and total interest.
• You might move within a few years.

If you’re not sure which loan fits, a HUD-approved housing counselor can walk through the numbers with you for free or at low cost.

Alternatives to no-down-payment mortgages

Run the numbers >> Find out how much house you can afford with Kikoff's affordability calculator.

Bottom line

A no-down-payment mortgage can get you into a home years sooner if you qualify for VA or USDA. You’ll pay for it with a bigger loan and more interest.

Lenders on both programs can set their own credit score minimums, and your score helps set a rate you’ll pay for the life of the loan.

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