Do I need a down payment?
When zero down is possible
With seller financing, the seller might agree to no down payment if you have strong credit or agree to a higher interest rate. Some lease-option deals also require no down payment beyond the option fee.
Government-backed loans like VA (for eligible veterans) and USDA (for rural areas) offer 0% down. FHA loans require 3.5% down with a 580+ credit score. Conventional loans typically need 3–20% down, depending on the lender and mortgage insurance.
- VA loan: 0% down for eligible veterans, active-duty, and some surviving spouses.
- USDA loan: 0% down for eligible rural properties and income limits.
- FHA loan: 3.5% down with 580+ credit score; 10% down with 500–579.
- Conventional loan: 3–20% down; PMI required if less than 20%.
- Seller financing: negotiable, but often 5–20% down.
Why sellers want a down payment
A down payment shows you're serious and gives the seller a cushion if you default. It also reduces their risk if they have to foreclose. In some states, a larger down payment can help you avoid being classified as a tenant rather than a buyer.
If you truly have no cash, you can ask the seller to credit you for repairs or closing costs, or look for down payment assistance programs through state and local housing agencies.
Common mistakes
- Assuming you need 20% down—many loan programs require much less.
- Forgetting that zero-down loans often come with higher interest rates or mortgage insurance.
- Not asking the seller to cover closing costs, which can effectively reduce your cash needed.
