How to buy a home with no money down
Quick Insights
- It’s possible to buy a home with as little as 3% down with a conventional loan and 3.5% down with an FHA loan.ec-fm-97-loan-val-opts,ec-hud-fha-loans
- VA and USDA loans may allow borrowers to pay 0% but have specific qualifications for consideration. Chase does not offer USDA loans at this time.ec-usda-hm-loan-prgm,ec-va-purchase-loans
- Down payment assistance programs may be able to help home buyers get the funds they need to make a minimum down payment.
One major step in becoming a homeowner is the down payment. While the traditional down payment has been 20% of the home’s value, in recent years that amount has been as low as 3%–5%. At the same time, with rising home prices, it may be harder for homebuyers to save enough money to cover a smaller down payment.
Thankfully, borrowers can apply for a no-down payment mortgage or use a low-down payment option with additional assistance. There are also programs to help you cover closing costs. Let’s explore them in more detail below.
Can you buy a house with no money down?
There are some cases where you can buy a home with no money down. Two types of zero-down mortgages are government-backed loans, such as a Department of Veterans Affairs (VA) loan and a U.S. Department of Agriculture (USDA) loan. Chase does not offer USDA loans at this time.
VA loan qualifications
VA loans are veterans assisted loans backed by the U.S. Department of Veterans Affairs. They’re set aside for those who served or currently serve in the military and their spouses. These loans can provide zero-percent down payment options for those who qualify.
USDA loan qualifications
USDA loans are for primary residences located in designated rural and suburban areas. In addition to location, the borrower must meet specific income limits and credit criteria to be eligible.
How do no-down payment mortgages work?
A government-backed mortgage means the loan is insured by the federal government. So, if a borrower defaults on payments, the lender knows they may be compensated, at least partially, by the government.
Because of this assurance, these loans typically come with less strict borrower requirements but may also require additional closing costs, like the VA loan’s upfront funding fee. While these extra expenses can be folded into the loan, they’ll add to the long-term cost of buying the home.
Low-down payment loan options
If you don’t qualify for a VA or USDA loan, there are potential low-down payment options, like FHA mortgages and income-based conventional loans. These loans are common for first-time homebuyers because they may require as little as 3% of the mortgage as a down payment. These types of loans often come with additional requirements, including mortgage insurance, which can increase total mortgage costs.
FHA loans
A Federal Housing Administration (FHA) loan is a government-backed mortgage that allows homebuyers to pay as little as 3.5% down. As an added benefit, these loans may have lower credit limits than conventional loans.
While these loans are available to all homebuyers, they tend to be better suited for first-time homebuyers and homebuyers with credit issues.
Fannie Mae HomeReady® mortgages
These conventional loans are available to homebuyers with a 3% down payment. To qualify for Fannie Mae’s HomeReady program, you’ll need to take a homebuyer education class and only earn up to 80% of the area median income (AMI). As added incentives, HomeReady loans may offer a $2,500 very-low income purchase (VLIP) borrower credit that can be put toward closing costs.ec-fannimae-hmready
You might hear these loans referred to as “conventional 97” loans because they allow borrowers to finance up to 97% of the home’s value.ec-fm-97-loan-val-opts However, you’ll owe mortgage insurance if you put less than 20% down.
FreddieMac Home Possible® loans
Like the HomeReady program, Freddie Mac’s HomePossible mortgage loans also allow low-income borrowers to pay as little as 3% down. FreddieMac’s program also features AffordableSeconds®, which gives homebuyers the ability to borrow up to 105% of the home’s value to cover home repairs and closing costs.ec-fredmac-hmpossible
How to get help with a down payment
While you’ll need to pay some money upfront when buying a home, there are ways to get money in the form of gifts, grants or loans that can help.
Homebuyer assistance programs
In addition to low-down payment loans, assistance programs and grant options—depending on your personal, financial and geographic qualifications—may also be available. These programs can offer support in the form of down payment and closing costs. Keep in mind these programs vary by state. To learn more, contact your state’s housing finance authority (HFA).
Lender assistance
Many lenders, including Chase, offer lender assistance programs to help first-time homebuyers afford a mortgage. Talk to your Home Lending Advisor to learn more about how you can qualify for this assistance.
Seller concessions
In some situations, a home seller may be willing to cover part of the closing costs for a home. This usually happens with motivated sellers or in a buyers’s market. For conventional loans, Fannie Mae sets limits on seller concessions at 3% if you’re putting down less than 10%, and 6% if you’re putting down between 10% and 25%.ec-fannimae-ipcs
Gifted funds
If you have family members who can help you cover the cost of your down payment, they can typically cover the entire cost to close. It’s important this is understood to be gift money, not a loan, and your lender may require you to provide a gift letter. For more information on your specific circumstances, it may be a good idea to consult a tax professional.
In summary
Buying a house with no money down is possible with the right mortgage and down payment assistance. However, you may find more availability with a low-down payment mortgage and grant options. Also, the more you can put down, the stronger your position will be when making offers and negotiating with lenders.
If you’re a first-time homebuyer, speak with a home lending advisor today. They can help you find a mortgage option that best suits your needs.
No-money down mortgages: FAQs
Can I really buy a house with no money down?
Even with a no-down payment mortgage or assistance program, you’ll probably still need to make an earnest money deposit of at least 1%–3% of the sale price. You’ll also need to cover the closing costs on your loan.
What credit score is needed to buy a house with no money down?
Depending on the loan, you can buy a home with no money down using a VA or USDA mortgage, both of which don’t have an official minimum credit score. However, different lenders will have different minimum credit score requirements. Also, the higher your credit score, the more likely you are to be approved and get a favorable interest rate.
Can I buy a house if I don't have money saved?
In theory, you can buy a house with no money down if you can put together the right combination of gifts and loans to help cover your down payment and closing costs. However, you might have a hard time qualifying for a good interest rate or longer repayment term.
