Buying a home with no down payment sounds like a loophole, but in the U.S. there are really two mainstream purchase programs that can legitimately finance 100% of an eligible home’s price: VA and USDA. Both can remove the biggest upfront hurdle for qualified buyers, yet they serve very different people. A zero down mortgage also does not mean a zero-cost closing. You may still need money for inspections, prepaid taxes and insurance, lender charges, or costs not covered by seller credits or other permitted sources.
A VA loan no down payment option is available to eligible Veterans, active-duty service members, certain National Guard and Reserve members, and some surviving spouses who can obtain a Certificate of Eligibility. You must also meet the lender’s credit and income standards and intend to occupy the property as your primary residence.
VA does not require a down payment when the sales price is no higher than the home’s appraised value. VA-backed purchase loans also do not require monthly private mortgage insurance, which is a major advantage over many low-down-payment alternatives.
1. VA loan: the strongest zero-down option for eligible military borrowers
The VA funding fee is the main trade-off
Most VA borrowers pay a one-time funding fee unless they qualify for an exemption. For a purchase loan with less than 5% down, the current fee is 2.15% for first use and 3.3% after first use. Certain borrowers, including many receiving VA disability compensation, may be exempt. The fee can generally be paid at closing or financed into the loan.
Consider a first-time VA user buying a $300,000 home with no down payment and no funding-fee exemption. A 2.15% fee equals $6,450. If financed, the starting balance becomes about $306,450. That preserves cash, but it also means beginning with less equity and paying interest on the financed fee.
VA financing is not automatic approval. Lenders still evaluate income, debts, credit history, and the property. If the purchase price is above the VA appraisal, the zero-down benefit may not cover that gap.
2. USDA loan: zero down for qualifying buyers in eligible areas
USDA zero down financing serves a different group. The Single Family Housing Guaranteed Loan Program can provide 100% financing to eligible low- and moderate-income buyers purchasing a primary residence in a USDA-eligible rural area. “Rural” can include small towns and some communities outside major urban centers, so buyers should check USDA’s official property eligibility map rather than guessing.
USDA also applies household-income rules. The program generally requires household income to stay within the applicable area limit, and the property must meet program requirements. Borrowers work through USDA-approved lenders and must show stable, dependable income and an ability to repay.
USDA fees for fiscal year 2027
For fiscal year 2027, which began October 1, 2026, USDA’s guaranteed program uses a 1.00% upfront guarantee fee and a 0.35% annual fee for purchase and refinance transactions. The upfront fee can generally be financed. The annual fee is based on the scheduled unpaid principal balance and is collected over time.
On a $300,000 purchase financed at 100%, a 1.00% upfront fee is $3,000. If financed, the initial loan amount would be roughly $303,000 before any other eligible financed items. That upfront percentage is lower than the standard first-use VA funding fee, but USDA has the continuing annual fee that VA does not require.
USDA’s biggest limitation is eligibility
USDA can fit a buyer with reliable income who has not accumulated a large down payment, but both the household and property must qualify. A buyer above the applicable income limit, or a home outside an eligible area, cannot choose USDA simply because the payment looks attractive.
USDA may allow certain closing costs to be financed when the appraised value supports the higher loan amount. Seller contributions and gift funds can also help.
VA vs. USDA: which zero-down mortgage is better?
If you are eligible for VA financing, VA is often the cleaner long-term zero-down structure because it has no monthly mortgage insurance and no USDA-style annual guarantee fee. A funding-fee exemption can make it even more attractive. USDA, however, opens a genuine zero-down path to buyers who have no military eligibility and are willing to purchase in a qualifying area.
Compare more than the required down payment. Ask lenders for Loan Estimates and review the rate, lender fees, financed guarantee or funding fees, cash needed at closing, and total monthly payment. A lower upfront cost can be offset by a higher rate or ongoing fee.
Zero down means equity builds more slowly
With a traditional down payment, you begin with an ownership cushion. With 100% financing, initial equity may be close to zero, and financing a VA funding fee or USDA upfront guarantee fee can put the loan balance above the purchase price at closing.
That does not make zero-down financing a bad choice. It changes the risk calculation. If home values fall shortly after purchase, selling or refinancing can be harder because transaction costs may exceed available equity. Think about how long you expect to stay in the home and keep an emergency fund instead of viewing the down payment as the only cash goal.
Frequently asked questions
Can anyone get a no down payment home loan?
No. VA requires qualifying military-related eligibility plus lender approval. USDA requires an eligible borrower, qualifying household income, an eligible property location, and lender approval.
Do zero-down loans cover closing costs too?
Not automatically. VA generally allows the funding fee to be financed, but other closing costs may need to come from your funds, seller credits, or other permitted sources. USDA can offer more flexibility to finance certain eligible costs when the appraisal supports the loan amount.
Is USDA zero down only for first-time buyers?
No. USDA’s guaranteed home loan program is not limited to first-time homebuyers. You still must satisfy its occupancy, income, property, and underwriting requirements.
Is zero down always better than making a down payment?
No. Keeping cash can be valuable, but a down payment reduces the amount borrowed and creates immediate equity. The better choice depends on your reserves, monthly budget, expected time in the home, and program fees.
Choosing between the two real zero-down options
No down payment home loans can solve a genuine affordability problem, but they are targeted programs rather than universal financing. VA is built around military-service eligibility and offers the major advantage of no monthly mortgage insurance. USDA is based on income and property eligibility and gives qualified buyers outside the VA system a true 100% financing route.
Before choosing either one, compare the full cost of borrowing and the cash you will have left after closing. The strongest zero-down purchase is not simply the one that uses the least cash upfront. It is the one that leaves the monthly payment manageable, the eligibility rules clearly satisfied, and enough financial breathing room to handle homeownership after the keys are yours.
