How to Buy a House with No Money in 2023

Published April 17, 2023

Written by Megan Duggan
Edited by Jenny Rollins

Potential homebuyers and renters nationwide are facing some of the most unaffordable housing costs in history. The current average cost to buy a house is $327,514. Mortgage rates have skyrocketed, and homeownership might feel impossible.

But despite the current real estate market, there are still affordable ways to buy a home, including low and no money down options and assistance programs.

It isn’t technically possible to buy a house with no money at all. Any program that says that it costs absolutely nothing is probably a scam. But there are lots of ways to bring down the cost of buying a home.

And an agent who has experience with down payment assistance programs, first-time buyers, and low-income buyers can help.

How to buy a house with no money

Even though buying a house with no money at all isn’t possible,with some research and creativity, you can find cost-effective ways to buy a home, like

Down payment and closing cost assistance programs
No down payment mortgage options
Rent-to-own mortgage programs
Nonprofit and government programs

Down payment and closing cost assistance programs

There are more than 2,000 down payment assistance (DPA) programs available across the country. State, county, and city governments run many of these programs. There are also programs for people with certain professions, like members of the military, teachers, and law enforcement officers.

Down payment assistance “soft second” mortgages

A “soft second” mortgage is a DPA program that provides low- to moderate-income homebuyers with a second mortgage loan to help pay the down payment and closing costs.

Unlike a traditional second mortgage, a soft second mortgage is typically a forgivable loan. The borrower doesn’t have to repay the loan unless they sell or refinance the house.

Specific terms and conditions of soft second mortgages depend on the program and lender. Make sure to research and compare different programs, and consider working with a mortgage professional to make sure you pick the best one for you.

Federal assistance: Housing and Urban Development

The U.S. Department of Housing and Urban Development (HUD) offers a variety of DPA programs designed to make buying a home more affordable. Even though these are federal programs, they vary from state to state, so look at the available assistance in your area.

HUD also offers specialized home loans for people belonging to certain professions. For example, the Good Neighbor Next Door program gives teachers, law enforcement officers, EMTs, and firefighters a 50% discount off the home’s listing price to revitalize certain communities. Buyers have to commit to live primarily on the property for 36 months to participate.

To qualify for the Good Neighbor Next Door program:

Check if you’re eligible to participate in the program. You must be a law enforcement officer, teacher (preschool through grade 12), firefighter, or EMT to qualify.
Review the listings in your state.
Follow the instructions to submit your interest in a specific home. (If there are multiple people interested in a home, HUD will use a lottery system to determine who will move forward.)
Apply for a second mortgage and request a note for the discount amount. You’re not required to pay as long as you fulfill the three-year residency requirement

No down payment mortgage options

There’s a common misconception that you have to pay 20% of the house’s listing price as a down payment. But actually, the average down payment in 2022 was only 13%, according to a report from the National Association of Realtors.

And there are even several ways to get a mortgage with no down payment.
Here’s a full list of down payment assistance resources.

Overview of low down payment options

Loan type	Down payment amount	Credit score	Best for...
Conventional fixed-rate loans	20%	620+	Homebuyers with an average credit history, who can have the same interest for the entire duration of the loan
Conventional fixed-rate loans	<20% + PMI	620+	Homebuyers with an average credit history, who can have the same interest for the entire duration of the loan
FHA loans	3.5%+	580+	Borrowers with a poor credit history, including first-time buyers and seniors. Lenders may require private mortgage insurance (PMI).
FHA loans	10%+	<580	Borrowers with a poor credit history, including first-time buyers and seniors. Lenders may require private mortgage insurance (PMI).
VA loans	N/A		Veterans and active duty service members, who tend to be offered more competitive interest rates
USDA loans	N/A		Low- or moderate-income buyers in less populated or rural regions, so long as their income doesn’t exceed 115% of the median household income for the area.

Zero down payment programs

USDA home loans

A U.S. Department of Agriculture (USDA) home loan offers a no down payment option in designated rural areas.

To qualify for a USDA home loan:

Ensure you meet the program’s eligibility requirements. Typically these include:
- U.S. citizenship
- Primary residence status
- Adjusted household income equal to or less than 115% of the area median income
Find an eligible property.
Sign a purchase agreement.
Complete any additional steps, like USDA home loan approval or a USDA appraisal.

VA home loans

Military service members, veterans, and surviving spouses could be eligible for a VA home loan from the U.S. Department of Veterans Affairs.

To qualify for a VA home loan:

Verify that you meet the eligibility requirements.
Request a VA home loan Certificate of Eligibility to present to your lender.
Sign a purchase agreement.
Complete any additional steps, like a VA home loan appraisal.

Low down-payment programs

In certain circumstances, the Federal Housing Administration (FHA) provides mortgages with down payments as low as 3.5%. FHA loans have flexible qualification requirements, like a 580 minimum credit score and 43% debt-to-income ratios, which make them more accessible than most other kinds of loans.

To qualify for an FHA home loan:

An FHA-approved appraiser has to evaluate the property to make sure it meets FHA’s minimum property standards.
The home must be the homebuyer’s primary residence.
The homebuyer must occupy the property within 60 days of closing.

FHA loans are a great option for first-time homebuyers and buyers with credit issues.

Forgivable loans and grants

Forgivable mortgage loans are a type of second mortgage, typically large enough to cover an entire down payment. Buyers don’t have to pay back this type of loan or grant as long as they live in a home for a set number of years.

Forgivable loans usually have a low interest rate (sometimes 0%), and lenders will often forgive the loan after five years. Lenders can make the forgiveness period longer, even up to 20 years. But if the buyer moves or refinances before the forgiveness period ends, they must repay all or a portion of the loan.

Rent-to-own programs

Rent-to-own mortgage programs are a home financing option that allows renters to eventually purchase the property they’re currently renting. A rent-to-own lease includes an option to purchase the property at a predetermined price within a specified time frame, generally two to five years.

The renter pays rent as usual, with an extra amount that goes into an escrow account to count toward a down payment. If the renter chooses to buy the property, that money goes toward the purchase price. If the renter chooses not to buy the property, they usually forfeit that money.

Rent-to-own mortgage programs can help prospective homebuyers who don’t have the credit or savings to qualify for a traditional mortgage. It can also be a good option for people who want to test out a neighborhood or a specific property before committing to a purchase. But many rent-to-own programs can also be sketchy and even predatory. Make sure to review the lease agreement and talk to a professional before committing.

If you’re interested in learning more about rent-to-own mortgage programs, we recommend Trio and Pathway HomeSaving.

Nonprofit and government programs

If you qualify, nonprofit and government programs can also supplement (or completely cover) your down payment.

Habitat for Humanity

Habitat for Humanity builds homes for families in need of shelter across the country. Homeowners then contribute “sweat equity” in the form of volunteering – building the house, working in a local office, or helping in other ways.

To qualify for Habitat for Humanity’s program, you must:

Demonstrate a need for safe, affordable housing
Earn less than 60% of the median income for the area (defined by HUD)
Be able to pay a mortgage that doesn’t exceed 30% of your gross monthly income

Habitat for Humanity also offers affordable home loans through Habitat Mortgage Solutions, which is designed to boost affordable homeownership through flexible capital, financial services, and mortgage origination support.

Government Mortgage Programs

Along with its Good Neighbor Next Door program, the U.S. Department of Housing and Urban Development (HUD) also offers homeownership assistance for public housing residents who want to purchase a home.

Find a real estate agent

An experienced real estate agent can help guide you and advocate for you through any of these processes. They will know which program is the best fit for you and your situation.

Cost of Buying a Home in 2023

The total average home value in the U.S. is $327,514. Let’s take a deeper dive into those numbers:

Your earnest money deposit is typically around 3% of the purchase price of the home, so factor that into your budget.
Set aside at least 3.5% for a down payment (or work with a down payment assistance program). If you have a lower credit score, you’ll probably have to pay a higher down payment.

Affordable homeownership is possible with a little research and time. With the right kind of help, you’ll be well on your way to owning your home.