20 Best Zero-Down Mortgages for First-Time Homebuyers
Zero-down homeownership isn’t a myth—it’s a movement. An unprecedented wave of innovative programs, federal policies, nonprofit lending models, and private lender perks has made it truly possible to buy your first home without a dime down.
🔑 Key Takeaways
| ❓Question | 💡Quick Answer |
|---|---|
| Is 0% down possible today? | Yes—with VA, USDA, NACA, or via DPA + 3% loans. |
| What’s the best 0% loan overall? | VA loan (for eligible veterans). |
| What’s the best non-military 0% path? | USDA (rural) or NACA (urban + credit-flexible). |
| Can I buy with bad credit? | Yes—FHA + DPA or NACA (no credit score used). |
| Do banks really offer grants? | Absolutely—up to $17,500 from Bank of America alone. |
💼 “Which 0% Mortgage Fits My Life?”
| 🏡 Program | 🧍♂️ Ideal Buyer | 💸 Down Payment | 🔒 PMI | 🧮 Credit Needs | 💥 Unique Perks |
|---|---|---|---|---|---|
| VA Loan 🇺🇸 | Military/veterans | 0% | ❌ None | 620+ | No PMI, reuse OK |
| USDA Loan 🌾 | Rural buyer <115% AMI | 0% | ✅ 0.35% | 640+ | Lower PMI than FHA |
| NACA 🏙️ | Urban, low/mod income | 0% | ❌ None | No score used | No fees, below-market rate |
| Navy Fed CU ⚓ | Military-affiliated | 0% | ❌ None | 620+ | Conventional terms |
| FHA + DPA 🏠 | Low credit, low savings | 3.5% (covered) | ✅ 0.55% | 580+ | Widely accepted |
| HomeReady/HomePossible 🧾 | Good credit, low savings | 3% (covered) | ✅ Cancelable | 620–660+ | Cancel PMI at 20% equity |
| U.S. Bank Dream Mortgage 💭 | Middle income, 640+ | 3% (grant) | ❌ Paid by bank | 640+ | $10k assistance, no PMI |
| Citi HomeRun® 💼 | Urban, no 20% saved | 3% | ❌ None | 620+ | No PMI ever |
| Chase DreaMaker + Grant 🏙️ | Urban, in grant area | 3% (grant/credit) | ✅ | 620+ | Up to $5K closing help |
| Bank of America Stack 💰 | Grant-eligible buyer | 3% (grant) | ✅ | 620+ | Up to $17,500 help! |
📍“I Don’t Qualify for VA or USDA—Now What?”
➡ Try the “Pair-and-Win” Strategy: Match a 3% down loan with a Down Payment Assistance (DPA) program that covers it. Voila: zero down.
| 🧩 Combo | 🔑 Components | 💥 Total Out-of-Pocket |
|---|---|---|
| FHA + State DPA | 3.5% loan + grant or forgivable loan | $0 upfront |
| HomeReady + Bank Grant | 3% loan + $7,500 lender grant | $0 or even cashback |
| Conventional 97 + City DPA | 3% down + local silent second | $0 |
Tip: Start with your state HFA (Housing Finance Agency)—many offer grants, low-interest 2nd loans, or full DPA stacks.
🧠 “How Do These Programs Stack Up—Fees, Costs, & Cancelability?”
| 📊 Program | 🏦 Upfront Fee | 💰 Monthly Fee | 📆 Cancelable? | 📉 Long-Term Cost |
|---|---|---|---|---|
| VA Loan | 2.15% funding fee | ❌ None | N/A | ⬇ Lowest |
| USDA Loan | 1% fee | 0.35% annual | ❌ No | ⬇ Low |
| FHA Loan | 1.75% MIP | 0.55% annual | ❌ No (under 10% down) | ⬆ Higher |
| Conventional 97 | None | Varies (0.5–1.5%) | ✅ Yes (at 78–80% LTV) | ⬇⬇ Best over time |
| Citi HomeRun | None | ❌ None | N/A | ⬇⬇ No PMI ever |
PMI freedom = thousands saved over 30 years.
💡 “Where’s the Free Money?”—Top DPA & Grant Programs
| 🏦 Provider | 💸 Max Grant | 🧾 Use Case | 🌍 Limitations |
|---|---|---|---|
| Bank of America | $17,500 (stacked) | Down payment + rate buydown | Select areas only |
| U.S. Bank | $10,000 + lender-paid PMI | Closing or down payment | AMI limits apply |
| Chase | $2,500–$5,000 | Rate buydown + costs | Targeted census tracts |
| Wells Fargo | $5,000–$10,000 | Down payment + closing | Metro areas only |
| State HFAs (various) | $7,500–$15,000+ | Silent seconds or grants | Income, purchase price limits |
🔥 Hot Tip: Some cities offer $25,000+ forgivable second loans if you stay 5–10 years.
🧮 “What’s the Best Mortgage by Profile?”
| 👤 Profile | 🏆 Best Product | 🎯 Reason |
|---|---|---|
| Veteran / Active Duty 🇺🇸 | VA Loan | 0% down + no PMI = unbeatable |
| Rural Household <115% AMI 🌄 | USDA Loan | 0% down + low monthly costs |
| Credit Score <640, Low Savings 🧾 | FHA + DPA | Most lenient approval |
| Credit Score >660, No Savings 💳 | HomeReady/HomePossible + DPA | Cancelable PMI + low rates |
| Low Income, Willing to Wait ⏳ | NACA Mortgage | No fees, PMI, or score needed |
📦 “What Should I Ask a Lender or Counselor Right Now?”
- ✅ “What’s the best 0% or 3% loan I qualify for?”
- ✅ “What local or state DPA grants can cover the down payment?”
- ✅ “Can I stack lender grants with DPA or a second mortgage?”
- ✅ “How much will PMI or MIP cost over 5–10 years?”
- ✅ “Can I cancel mortgage insurance later—or avoid it entirely?”
🏁 Final Checklist: Your 5-Step Action Plan
| ✔️ Step | 📋 What to Do |
|---|---|
| 1️⃣ | Pull your credit score & calculate DTI |
| 2️⃣ | Visit your state HFA to check DPA eligibility |
| 3️⃣ | Explore NACA or credit unions if you’re underserved |
| 4️⃣ | Get pre-approved with 3 types of lenders: bank, broker, credit union |
| 5️⃣ | Compare total cost over 5+ years, not just rates |
FAQs
💬 “Do Zero-Down Mortgages Make Me More Likely to Default?”
The risk depends less on down payment size and more on underwriting quality. Programs like VA and USDA include residual income tests or income caps that prevent borrowers from becoming overextended. The true danger comes when buyers enter programs without proper counseling or savings for emergencies.
| 📊 Factor | 🧠 Risk Insight | 🔒 Protective Mechanism |
|---|---|---|
| No equity buffer | Increases foreclosure risk if home values dip | VA’s residual income test ensures survival budget |
| Higher monthly fees | USDA & FHA charge annual fees → raises cost | DPA + grants offset upfront burden |
| Buyer preparedness | Lack of reserves → vulnerability to shocks | HUD education & credit union counseling required |
Critical takeaway: It’s financial literacy + program design—not just zero-down—that determines whether a buyer thrives or defaults.
💬 “If VA and USDA Are So Strong, Why Doesn’t Everyone Use Them?”
Because eligibility is highly specialized. VA is military-only, USDA requires both rural geography and income caps. That’s why urban borrowers or middle-income families often default to conventional + DPA stacks.
| 🗺️ Program | 🚧 Barrier | 🎯 Who Wins Instead |
|---|---|---|
| VA Loan | Must prove service eligibility | Veterans & active duty |
| USDA Loan | Rural address + income <115% AMI | Suburban fringe buyers |
| FHA/DPA | Credit leniency, urban coverage | Low-credit city buyers |
| Conventional 97 + DPA | Requires 620+ credit | Middle-class with stable jobs |
Key point: Geography + profile dictate availability—there’s no one-size-fits-all zero-down path.
💬 “What Hidden Costs Do Lenders Downplay?”
Zero-down doesn’t mean zero cost. Borrowers often overlook the ongoing insurance premiums, funding fees, or rate trade-offs.
| 🏦 Fee Type | 💸 Typical Range | ⚠️ Why It Matters |
|---|---|---|
| VA Funding Fee | 2.15–3.3% (financed) | Adds thousands unless exempt |
| USDA Annual Fee | 0.35% | Smaller but lifelong until payoff |
| FHA Mortgage Insurance | 0.55% annually | Lasts for life (unless >10% down) |
| Conventional PMI | 0.5–1.5% | Removable at 20% equity—big savings |
Pro insight: Borrowers should model 10-year cost projections, not just the closing table math.
💬 “Are Zero-Down Mortgages Bad for Competitive Markets?”
They can be a disadvantage in hot bidding wars. Sellers often prefer buyers with “skin in the game.” But skilled ABR® agents or loan officers reframe zero-down as liquidity flexibility—buyers still have cash reserves for repairs or appraisal gaps.
| 🔑 Competitive Edge | 📣 Messaging Strategy |
|---|---|
| Buyer has reserves | “No down payment frees funds for move-in or escrow gaps.” |
| Strong pre-approval | Provide DU/LP approval letter with offer. |
| Government-backed | VA/USDA signals lower risk due to federal guarantee. |
Pro angle: With the right negotiation framing, zero-down can be spun as strength, not weakness.
💬 “What Happens If I Sell Early or Refinance?”
Each program handles early exits differently—and penalties can surprise the uninformed.
| 📜 Loan Type | ⏳ Early Exit Consequence |
|---|---|
| VA Loan | Funding fee already paid; no recapture |
| USDA Loan | Fees not refundable; must repay if silent second DPA attached |
| FHA + DPA | Forgivable loans may claw back funds if sold early |
| Conventional + DPA | Grants are safe, but deferred loans balloon at sale/refi |
Critical lens: Always ask—“Is my DPA forgivable, deferred, or grant-based?”
💬 “Can Zero-Down Mortgages Build Wealth—or Just Trap Me in Debt?”
When executed well, they accelerate equity building, since homeowners start earlier. The trap emerges only when buyers ignore long-term costs or buy at the market peak without reserves.
| 📈 Wealth Builder | 🧩 How It Works |
|---|---|
| Early entry | Start equity clock years sooner |
| PMI cancellation | Conventional buyers drop costs once at 20% equity |
| Grant stacking | Reduces effective loan size immediately |
| Refinancing path | FHA buyers often refi to conventional once credit improves |
High-level insight: Wealth is built not by the absence of a down payment, but by strategic exit planning (PMI cancellation, refi timing, smart resale).
💬 “Is Using a DPA or Grant Going to Limit My Lender Options?”
Yes—but strategically. Most down payment assistance (DPA) programs are tied to specific approved lenders, which is how program administrators ensure compliance and reduce risk. While this may seem limiting, the tradeoff is access to subsidized rates, deferred second mortgages, or full grant forgiveness. However, those with excellent credit might find conventional lenders outside the DPA network offering better raw terms.
| 💼 DPA Type | 🔒 Restriction | 🧠 Strategic Tip |
|---|---|---|
| City/County DPA | Must use local lender | Work with a loan officer who’s DPA-certified |
| Statewide HFA Program | Participating lenders only | Often come with below-market rates |
| Employer/Nonprofit DPA | Tied to partner credit unions | Great for teachers, nurses, municipal staff |
Key Insight: You’re trading lender flexibility for funding—but done right, you gain more than you give up.
💬 “How Does a Zero-Down Mortgage Impact Appraisal Gaps?”
Zero-down buyers often face challenges in appraisal-gap scenarios because they have no equity cushion to bridge the difference. In hot markets, sellers expect buyers to cover appraisal shortages in cash. Zero-down borrowers must get creative, like using lender credits, gift funds, or escalation clauses with appraisal riders.
| 🏡 Challenge | ⚠️ Risk | 💡 Smart Counter |
|---|---|---|
| Appraisal < Offer Price | Buyer must cover shortfall | Use cash reserves or structure a tiered clause |
| No down payment buffer | Less leverage in bidding | Leverage VA/USDA approval strength |
| Seller uncertainty | Viewed as less “committed” | Provide DU/LP approval upfront with proof of reserves |
Advanced Strategy: Partner with an ABR® agent who knows how to frame your zero-down position as financial flexibility, not a weakness.
💬 “Why Are Credit Union Zero-Down Loans So Underrated?”
They’re the hidden gems of zero-down lending. Unlike major banks, credit unions often structure loans for community empowerment, not profit margins. Some even waive PMI, offer below-market rates, or stack grants for first-time buyers. The downside? Limited geographic reach and manual underwriting that takes longer.
| 🏦 Credit Union Perk | 🤑 Value | 🤝 Who Benefits Most |
|---|---|---|
| No PMI programs | Saves $150–$300/month | Good-credit buyers with low cash |
| Employer-affiliated grants | Up to $10K in DPA | Teachers, first responders |
| Member-exclusive terms | Lower rates & fees | Credit union members or joiners |
Hidden Advantage: They often work with non-traditional income types (like gig workers or self-employed) more flexibly than big lenders.
💬 “Can I Use Zero-Down for Multi-Family or Investment Properties?”
In almost all cases: No. Zero-down programs like VA, USDA, and FHA require owner occupancy. However, the VA loan allows up to 4-unit properties if you live in one unit—making it a powerful house-hacking tool for veterans. FHA allows 3.5% down on multi-family homes, which is the next best option.
| 🏘️ Property Type | 🧾 Eligible Program | 📌 Requirement |
|---|---|---|
| 2–4 Unit VA Loan | Yes (Veterans only) | Must occupy one unit as primary |
| FHA 3.5% Loan | Yes (up to 4 units) | Must live in one unit |
| USDA/Fannie 97 | No multi-family allowed | Only for 1-unit, owner-occupied homes |
Investment Insight: Want to build wealth? Ask your ABR® agent about multi-family house hacks using VA/FHA eligibility.
💬 “How Does an ABR® Agent Actually Change My Buying Experience?”
An Accredited Buyer’s Representative (ABR®) isn’t just a fancier title—it’s a signal of advanced fiduciary training, negotiation mastery, and buyer-first ethics. Unlike typical agents juggling buyers and sellers, an ABR® is certified to exclusively represent your interests, ensuring you’re never on the wrong end of a dual-agency conflict.
| 🎯 ABR® Superpower | 🔍 Buyer Benefit |
|---|---|
| Fiduciary-level loyalty | You—not the seller—are the priority |
| Data-backed CMAs | You avoid overpaying or falling for “list-price traps” |
| Contract + escrow expertise | Reduced risk of missed deadlines or legal blindspots |
| Ethics & exclusivity focus | No behind-the-scenes seller conflicts |
Real-World Result: ABR® agents often win bids without being the highest offer, because they craft offers sellers can’t refuse through cleaner terms and stronger packaging.
💬 “How Do I Know If My ABR® Agent Is Actually Negotiating on My Behalf?”
Don’t rely on titles—look at behavior. A true ABR® doesn’t just unlock doors; they decode motivations, structure layered offers, and challenge appraisals or timelines when needed. Look for actions, not acronyms.
| 🧪 Proof of Advocacy | 🔍 What to Look For |
|---|---|
| Counteroffer Creativity | Are they crafting seller-friendly win-wins to get your price accepted? |
| Escalation Language | Do they control escalation clauses to prevent overpaying? |
| Lender + Agent Sync | Do they coordinate timeline, appraisal, and CD issuance proactively? |
| Disclosures Diligence | Are they pointing out red flags in seller paperwork before you ask? |
Watch for silence. A passive agent will let things slide; a real ABR® fights intelligently at every stage.
💬 “Why Do Some Zero-Down Buyers Lose Deals—Even With Pre-Approvals?”
Because many offers fall apart on the fine print, not the financing. Zero-down buyers often fail to match seller expectations around speed, certainty, and appraisal gap coverage. Without a skilled ABR® and a strategic loan officer, the offer can read as “low commitment.”
| 🧨 Weakness Factor | 😬 Why It Fails | 💡 Countermove |
|---|---|---|
| No Appraisal Gap Funds | Sellers fear low appraisal = busted deal | Use gift funds or limit clause in writing |
| Slow Lender Response | In hot markets, delays = lost deals | Partner with a DPA-friendly local lender |
| Weak Escrow Deposit | $500 doesn’t impress in a $500K market | Ask your agent about a strategic EMD match |
| No Underwriting Done | Pre-qual ≠ underwritten approval | Use TBD underwriting or DU/LP approval upfront |
Fix: Get your offer fully “offer battle-ready”—clean, backed by cash reserves, and presented with confidence.
💬 “Is It Better to Stack DPA Programs or Stick to Just One?”
If allowed, stacking is a game-changer. Some states and nonprofits allow borrowers to combine multiple assistance types—forgivable grants, deferred second liens, and even employer-based support. But it’s a compliance minefield without expert guidance.
| 🧱 Program Layer | 💥 Advantage | ⚠️ Watch Out For |
|---|---|---|
| State HFA + City Grant | Larger combined assistance | Must follow stricter combined DTI caps |
| Employer + DPA Stack | Can offset closing costs entirely | Employer programs may require tenure |
| Lender DPA + USDA/VA | Rare, but possible in high-cost areas | Only works if lender allows piggybacking |
Expert Move: Ask your loan officer to show you a “stacked DPA waterfall” breakdown across three scenarios—you’ll often save $15K+ with the right blend.
💬 “Do Appraisers Treat Zero-Down Loans Differently?”
Technically no—but practically, yes. Appraisers are supposed to be loan-program neutral. However, in reality, some know that FHA and USDA guidelines trigger stricter property standards (peeling paint, missing handrails, etc.). For VA loans, there’s a Tidewater process that can delay closings if value comes in low.
| 📏 Loan Program | 📉 Appraisal Hurdle | 🛠️ Fix |
|---|---|---|
| FHA | Requires safety repairs before closing | Do pre-inspections to flag issues early |
| VA | Tidewater may lower appraised value if not defended | Agent must preemptively prep comps |
| USDA | Similar to FHA; stricter condition review | Avoid aged properties without renovation history |
| Conventional | Most flexible | Best for fixer-uppers or fast closings |
Pro-Level Tip: Use an ABR® who pre-screens properties for loan-type compatibility—a subtle but powerful edge.
💬 “What’s the Fastest Way to Get Zero-Down Financing Cleared for Closing?”
Speed isn’t about skipping steps—it’s about stacking approvals concurrently. Here’s what elite agents and lenders do behind the scenes:
| ⏱️ Speed Booster | ⚙️ Description |
|---|---|
| TBD Underwriting | Get fully underwritten before picking a house |
| DPA Certificate Fast-Track | Complete homebuyer education in week 1, not week 3 |
| Processor-Led Packaging | Processor works with LO to chase conditions proactively |
| Escrow Coordination | Title, insurance, and HOA docs ordered before appraisal clears |
High-performance pipelines can close zero-down files in 18–22 days—on par with conventional offers.
