The dream of home ownership may feel out of reach since conventional wisdom says you’re supposed to have a down payment of up to 20%. However, that couldn’t be more wrong. The National Association of Realtors says the average down payment on a house is 6% to 7% and has been since 2018.

There are loan programs available that require as little as 0% — financing the entire purchase price of the house. The big two are loans from the U.S. Department of Agriculture and the U.S. Department of Veterans Affairs. Each has certain requirements, but they may help you buy your first or next home more quickly and easily than if you had to save a large lump sum for your down payment.

USDA Loans

The U.S. Department of Agriculture may seem like an odd source for a home loan. However, the department supports rural and suburban areas by offering zero down payment mortgages for hopeful homeowners who live in those areas.

This option is a 30-year fixed interest rate loan. Your mortgage payments will be higher than if you’d put a down payment on the house because you’ve financed the entire cost of your new home. The good news is that interest rates are usually below the going rate.

There are a few requirements you must meet to qualify for this loan:

• The house you’re buying must be a single-family residence.

• The house has to be your primary residence.

• You have to carry private mortgage insurance. USDA loans typically have very low PMI rates. 

Income Limits

There are income limits for USDA loans, which vary according to the county you’re moving to. For example, in Montgomery County, Kentucky, a one to four-member household can’t exceed $103,500 per year. For a five to eight-member household, the upper limit is $136,600.

Financial Background Requirements

To get a USDA loan, your credit score must be above 640, and you can’t have any recent late payments, bankruptcies, or foreclosures on your credit report.

You have to have a steady income source and a solid employment history. If you’re self-employed, you’re still eligible, but you need to supply at least two years of income tax returns to demonstrate your typical yearly income.

VA Loans

The Department of Veterans Affairs offers no down payment mortgages for those who have served or are currently serving in the military. If you’re an active member of any branch of the military, you’re eligible to apply after your first 90 days of service. For veterans, the amount of time served varies depending on when you were in the military.

For example, if you served in WWII, you must have served for 90 days — unless you received a medical discharge, in which case you’re eligible no matter how long you served.

If you served between August 2, 1990, and now, you have to have served for 24 consecutive months, at least 90 days if you were discharged for a hardship or force reduction, or less than 90 days if you left the military on a service-related disability.

Members of the National Guard or the Reserve are eligible for VA mortgages once they’ve served at least 90 days between August 2, 1990, and now. If you served before that, you’re eligible after 90 days of active service or six years of service in the Guard or Reserve.

To get a VA loan, you must request a Certificate of Eligibility to show your lender that you’re eligible based on your time of service. You can learn how to request your COE online through the VA.

If you have full entitlement to your VA loan, meaning you’ve either never used your mortgage benefit or you’ve repaid your entire mortgage already, your upper mortgage limit is $644,200. The biggest factors that will limit your mortgage are how well you meet the individual lender’s qualifications in regards to your credit, income, and assets.

The VA will guarantee to pay the lender $36,000 if you default on a loan of up to $144,000, or 25% of the loan if your mortgage is more than that. If you do take out a larger mortgage, individual lenders may want you to make a down payment on your new home.

The VA doesn’t require a certain credit score, but lenders who offer VA loans often do. They typically require a credit score of 620 or higher with evidence of sufficient income and a good debt-to-income ratio.

Other Ways To Get a No Down Payment Loan

If you’re not eligible for a USDA or VA loan, there are other ways to buy a house without a down payment.

• Apply for down payment assistance from local or national programs.

• Accept monetary gifts from family members, churches, nonprofit organizations, or your employer to make up your down payment.

• Take out an FHA loan and use one of the other sources for a down payment. FHA loans only require a 3.5% down payment. However, that can still be a lot of money. For a $250,000 house, your down payment would be $8,750.

Don’t Pay Closing Costs

You may also want to look for ways to avoid having a lump sum for your closing costs. Closing costs cover the administrative parts of getting a mortgage. Here are a few ways to get around paying closing costs.

• Request lender credits. When you ask for lender credits, your lender will pay your closing costs for you. In exchange, you agree to have a higher interest rate on your loan.

• Ask the seller to pay. When you put in an offer on a house, you can ask the seller to pay the closing costs.

• Get a home equity line of credit or a second mortgage. These can cover your closing costs.

There are many ways to buy a house without a down payment. USDA and VA loans do not require one, or you can receive down payment funds from various sources. Your dream of home ownership is still alive, even without a down payment.