Zero Down Payment Home Loans: Your Complete 2026 Guide

The down payment is the single biggest barrier to homeownership in America. According to recent surveys, 68% of renters say saving for a down payment is the primary reason they haven't purchased a home. But here's what most people don't realize: you may not need to save a single dollar for a down payment.

Zero down payment home loans are real, widely available, and used by millions of Americans every year. In this comprehensive guide, we cover every zero-down mortgage option available in 2026 — from government-backed loans to assistance programs — so you can find the path that works for your situation.

Understanding Zero Down Payment Home Loans

A zero down payment home loan is exactly what it sounds like: a mortgage that allows you to purchase a home without making an upfront down payment. Instead of paying 3%, 5%, or 20% of the purchase price out of pocket, you finance the entire purchase price (or close to it, with assistance covering the rest).

There are two categories:

1. True zero-down mortgages — loan programs that structurally require no down payment (VA and USDA loans)
2. Effectively zero-down purchases — loan programs that require a small down payment (FHA at 3.5%, Conventional at 3%), combined with grants or assistance that cover that amount

Both result in the same outcome: moving into your home without draining your savings for a down payment.

VA Loans: The Best Zero-Down Option

If you have military service, stop reading here and go apply. We're only half-joking — VA loans are genuinely the best mortgage product available to anyone, period.

Key Features

• Zero down payment — no limit on purchase price for full entitlement
• No PMI — saves $100-$400/month vs. conventional loans
• Lowest average interest rates of any mortgage type
• No maximum loan amount for borrowers with full entitlement
• Lenient credit — most lenders accept 580-620+
• Assumable — future buyers can take over your loan at your rate
• Reusable — use it multiple times throughout your life

Who Qualifies

Veterans, active-duty service members, National Guard/Reserve members (with 6+ years of service), and eligible surviving spouses. You'll need a Certificate of Eligibility (COE), which your lender can pull in minutes.

The Funding Fee

The only catch: a one-time funding fee of 2.15% (first use, zero down) that sustains the program. It can be financed into the loan. Veterans with service-connected disabilities are exempt.

VA Loan by the Numbers

USDA Loans: Zero Down for Suburban and Rural Buyers

The USDA Rural Development loan program is the other true zero-down option, and it's not just for farmers. Approximately 97% of the U.S. land mass is USDA-eligible, including many suburban communities that feel anything but rural.

Key Features

• Zero down payment
• Below-market interest rates
• Low mortgage insurance — 1% upfront + 0.35% annual (lower than FHA)
• 30-year fixed terms
• Available to all eligible buyers — no military service required

Who Qualifies

• Location: Property must be in a USDA-eligible area (check the USDA eligibility map)
• Income: Household income cannot exceed 115% of area median income
• Credit: Typically 640+ for automated approval
• Primary residence: Must be your primary home

The income limits are more generous than you might expect. For a family of four in many areas, the limit ranges from $110,000-$150,000+. And "eligible areas" include suburbs of major cities — even some areas within city limits in smaller metros.

USDA Loan by the Numbers

FHA Loans + Down Payment Assistance

FHA loans require 3.5% down — but when paired with down payment assistance (DPA), that 3.5% is covered by a grant or forgivable loan, making it effectively zero-down.

How FHA + DPA Works

1. You get an FHA first mortgage for 96.5% of the purchase price
2. A DPA program provides a grant or second mortgage covering the 3.5% down payment
3. You bring zero dollars to closing for the down payment
4. Many DPA programs also cover closing costs

Types of DPA Programs

• Grants: Free money, never repaid. TSAHC in Texas and similar programs in other states offer these.
• Forgivable second mortgages: Forgiven after 3-10 years of living in the home. TDHCA and SETH in Texas use this model.
• Deferred-payment seconds: No payments due until you sell, refinance, or pay off the first mortgage.
• Low-interest seconds: Small monthly payments on the DPA amount.

There are over 2,000 DPA programs nationwide, offered by state housing agencies, counties, cities, and nonprofits. Every state has at least a few options.

FHA + DPA by the Numbers

Conventional Loans + DPA

Conventional loans through Fannie Mae and Freddie Mac offer 3% down options for first-time buyers. Like FHA, that 3% can be covered by DPA programs.

Advantages Over FHA

• PMI is removable once you hit 20% equity (FHA's MIP lasts the loan's lifetime)
• No upfront mortgage insurance premium
• Better rates for high credit scores (720+)
• Higher loan limits in many areas

The Trade-offs

• Higher credit score requirements (typically 680+ for best rates)
• Stricter underwriting guidelines
• Fewer DPA programs work with conventional loans (though TSAHC in Texas does)

Comparing All Zero-Down Options

How to Choose the Right Zero-Down Option

With multiple pathways to homeownership with no money down, choosing the right one depends on your specific situation. Here's our decision framework:

If you have military service → VA Loan

This should always be your first choice. The combination of zero down, no PMI, and low rates is unbeatable. Even if you qualify for other programs, VA is almost always the better deal.

If you're buying in a suburban/rural area → Consider USDA

If the property is USDA-eligible and you're within income limits, USDA loans offer excellent terms. The low annual fee (0.35%) makes monthly payments very affordable.

If you're a first-time buyer in a city → FHA + DPA

FHA loans combined with state or local DPA programs are the most versatile zero-down option for non-veterans in urban areas. The credit requirements are reasonable (620+) and DPA programs are widely available.

If you have excellent credit (720+) → Conventional + DPA

If your credit score is strong and a DPA program works with conventional loans in your area, this route offers the advantage of removable PMI and potentially better rates long-term.

The True Cost of Waiting

Some buyers hesitate on zero-down loans, thinking they should wait until they've saved a 20% down payment. Here's why that can actually cost you more:

• Home prices rise while you save. At 4% annual appreciation, a $300,000 home becomes $312,000 in one year. Your $60,000 target just moved to $62,400 — and the home costs $12,000 more.
• Rent is gone forever. At $1,500/month rent, you're spending $18,000/year with zero equity to show for it. Even if a zero-down mortgage costs slightly more monthly, you're building wealth.
• Rate changes matter. A 0.5% interest rate increase on a $300,000 loan adds about $90/month — or $32,400 over the life of the loan.
• Life happens. Cars break down, medical bills pop up, job changes occur. The perfect savings plan rarely survives contact with reality.

We're not saying zero-down is right for everyone. But for buyers who can comfortably afford the monthly payment, waiting to save a large down payment often costs more than it saves.

What About Closing Costs?

Zero down doesn't always mean zero out of pocket. Closing costs — including lender fees, title insurance, appraisal, and prepaid taxes/insurance — typically run 2-5% of the purchase price.

Strategies to cover closing costs:

• DPA programs that cover both down payment and closing costs
• Seller concessions — negotiate for the seller to pay 3-6% of costs
• Lender credits — accept a slightly higher rate in exchange for the lender covering costs
• Builder incentives — new construction builders often offer $5,000-$20,000+ in credits
• Gift funds from family (all major loan programs allow this)

With the right strategy, it's entirely possible to buy a home with literally $0 out of pocket.

Qualifying for a Zero-Down Mortgage: Step by Step

1. Assess your situation — Take our Readiness to Buy quiz to see which programs you might qualify for
2. Check your credit — Pull free reports from AnnualCreditReport.com. Aim for 620+ for most programs, 580+ for VA.
3. Calculate your budget — Use online mortgage calculators to determine what monthly payment you can comfortably afford. A good rule: keep total housing costs under 30% of gross income.
4. Gather documents — You'll need recent pay stubs (30 days), W-2s (2 years), tax returns (2 years), and bank statements (2-3 months)
5. Find the right lender — Not every lender works with every program. Find one who specializes in zero-down strategies and participates in DPA programs in your area.
6. Get pre-approved — This shows sellers you're serious and gives you a clear picture of your buying power
7. Find your home and make an offer — Work with an agent experienced in zero-down transactions
8. Close and move in — Typical timeline: 30-45 days from accepted offer to keys in hand

Common Concerns About Zero-Down Loans

Will I be underwater on my mortgage?

With home values appreciating 3-5% annually in most markets, buyers who purchase with zero down typically build equity within the first 1-2 years. The risk of being underwater is much lower than it was during the 2008 crisis, thanks to stricter lending standards.

Will my interest rate be higher?

VA loans actually have the lowest average interest rates. USDA rates are competitive. FHA rates are typically lower than conventional. You might pay a slightly higher rate with some DPA programs, but the total savings from avoiding a down payment usually far outweigh the rate difference.

Is it harder to get approved?

Not necessarily. VA and USDA loans have straightforward qualification criteria. FHA is one of the most forgiving loan programs for credit issues. The addition of DPA doesn't make the underwriting process significantly more complex — your lender handles the coordination.

What if I can make a down payment — should I still go zero-down?

It depends. If you qualify for a VA loan, zero-down is almost always the smart choice (invest that money elsewhere). For other programs, consider whether keeping cash reserves for emergencies, repairs, and moving costs would be more valuable than a slightly lower monthly payment.

Frequently Asked Questions

What are zero down payment home loans?

Zero down payment home loans are mortgage programs that don't require any upfront down payment. VA loans and USDA loans are the two main true zero-down options. FHA and conventional loans can also become zero-down when paired with down payment assistance programs.

Who qualifies for zero down payment home loans?

VA loans are available to veterans, active-duty military, and eligible surviving spouses. USDA loans are available to any buyer purchasing in an eligible rural/suburban area within income limits. DPA programs vary by location but serve a wide range of income levels.

Are zero down payment home loans a good idea?

Yes, for many buyers. Zero-down loans help you build equity through homeownership sooner, and programs like VA loans offer better terms than conventional mortgages even with 20% down. The key is ensuring you can comfortably afford the monthly payment.

Related reading: Can You Buy a Home With No Money Down? · VA Loan Requirements 2026 · First-Time Homebuyer Programs in Texas