Can I Buy a Home With No Down Payment?

After years of record-breaking home price appreciation, it’s gotten harder and harder to achieve the gold-standard down payment of 20% for a house. So hard, that many potential buyers have decided to wait out the market until home prices and mortgage rates come back down to earth.

But if a down payment is such a steep barrier to entry, can you buy a house with no down payment at all?

The short answer: Yes, you can. Government-backed, no-down-payment-required loans can help uniquely qualified buyers purchase homes in certain areas. However, the buyers and houses that qualify for these programs are limited.

What is a down payment?

A down payment is the portion of a home’s purchase price that homebuyers pay upfront at closing. It’s often expressed as a percentage of the home’s price, which is where that golden 20% figure comes from.

But while it might be considered ideal, a 20% down payment is not a necessity. The average down payment in Q3 of 2024 was just 14.5%, according to research from Realtor.com®.

This is roughly on track with the decade before, but falls well below the early 2000s peak, when average down payments reached 25%, according to research from the National Association of Realtors®.

Why you should aim for a 20% down payment

Even though you can put less money down upfront, there’s good reason to try to hit that 20% mark. Paying more upfront means you’ll have lower monthly payments for several reasons:

• Lower principal balance: More money out of your pocket is less money out of the bank’s. That means you have less to pay the bank back, which lowers your monthly payments. 
• Lower interest rate: Lenders view buyers who can offer a large down payment as less risky and can offer better interest rates to these borrowers.
• No PMI: Most lenders require borrowers with down payments below 20% to purchase private mortgage insurance. PMI is an insurance policy that protects your lender (not you) in case you default on your mortgage payments.

Can you buy a home with no down payment?

Yes, it’s possible to purchase a house with no money down. Government-backed loans and other down payment assistance programs are the primary mechanism for doing so. 

However, these programs often carry strict eligibility requirements, and the average buyer is unlikely to qualify for them. So while it may be possible to buy a home with no down payment, it’s not an option for most homebuyers.

Even if you qualify, buying a home with no down payment comes with financial consequences that might make you think twice:

• Financial responsibility: As a homeowner, you alone are responsible for updates and repairs. If you’re strapped for cash, you might not be prepared for the hidden costs of homeownership.
• No equity: The cash you put down on your home instantly translates into equity, boosting your net worth for the price of liquidity. Without equity built up in your home, you won’t be able to capitalize on home equity loans or lines of credit.
• Greater risk of negative equity: With no initial equity, you’re more vulnerable to market fluctuations. If home values drop, you could owe more than your home is worth, limiting your ability to sell or refinance.

How to buy a home with no money down

To buy a house with a $0 down payment, you’re going to need some help. The first step is identifying which program you want to use to purchase your home. Below are some of the best options for homebuyers:

Government-backed programs

• FHA loans: Backed by the Federal Housing Administration, these loans require as little as 3.5% down and have lenient credit score requirements (as low as 500), making them an excellent option for many buyers.
• HUD homes: The U.S. Department of Housing and Urban Development sells foreclosed homes previously financed with FHA loans, often offering incentives like down payment assistance.
• VA loans: Guaranteed by the Department of Veterans Affairs, VA loans are available to qualified veterans and active-duty service members with no down payment required.
• USDA loans: Designed for low- to moderate-income buyers in eligible rural areas, USDA loans require no down payment for households earning up to 115% of the area’s median income.

Gifted down payment

If you have a generous benefactor in your life, now might be the time to call in a favor. Many lenders allow you to use gifted funds from friends or family to cover your down payment—as long as the donor is willing to provide documentation.

Lenders typically require a signed gift letter confirming that the funds are a gift, not a loan, and that there’s no expectation of repayment. This helps ensure the money won’t affect your debt-to-income ratio, increasing your chances of loan approval.