Seriously.

Most people think you need to save 20% before you can buy a home. That's not always true. Special loan programs let qualified buyers purchase homes with $0 down. And if you don't qualify for those, you might only need 3–3.5% down instead of the traditional 20%.

This guide shows you exactly how zero-down loans work, who qualifies, and what your realistic options are for buying a home in Tennessee (or anywhere in America) without massive savings.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

Quick Tips for No-Down-Payment Mortgages

• VA loans = $0 down for veterans and active military
• USDA loans = $0 down in rural areas (covers 97% of U.S. land!)
• FHA loans = Only 3.5% down for most first-time buyers
• Doctor loans = Special $0 down programs for physicians
• Down payment assistance = State programs can cover your entire down payment

First: Can You Buy a House With No Money Down?

Can you really buy a house with zero down payment? Yes, but there's a catch.

Only two loan types offer true $0 down: VA loans and USDA loans. Both have specific requirements about who qualifies and what properties you can buy.

That said, even with a zero-down mortgage, you still need cash for closing costs. These run 2–6% of the home's price and cover costs such as loan fees, property taxes, insurance, and title work.

So, a $200,000 house might require $0 down but still need $4,000–$12,000 for closing costs. That's much less than a traditional down payment, but it's not literally "no money."

Keep reading to see if you qualify for a zero-down mortgage.

Served in the Military? You Might Qualify for a $0 Down VA Loan

VA loans are the gold standard of zero-down mortgages. If you've served in the military, you probably qualify.

Who Qualifies for VA Loans

VA mortgage loans are available to:

• Active-duty service members
• Veterans who served and were honorably discharged
• National Guard and Reserve members (usually after 6 years)
• Surviving spouses of service members killed in action

You'll need a Certificate of Eligibility (COE) from the Department of Veterans Affairs. Getting one is free and usually takes a few days online.

Why VA Loans Are So Good

Three major benefits make VA loans the best deal in mortgages:

1. Zero down payment. Buy a house with literally no down payment.
2. No private mortgage insurance. Most loans under 20% down require insurance that costs $100–$200 monthly. VA loans skip this completely.
3. Better interest rates. VA rates typically beat conventional loan rates by 0.25–0.5%, saving you thousands over 30 years.

You can even buy a two- to four-unit property with a VA loan. Just live in one unit and rent out the others. That's a smart way to build wealth while keeping housing costs low.

The One Cost: VA Funding Fee

VA loans charge an upfront funding fee of 1.25–3.3% of the loan amount. This helps keep the program running.

On a $250,000 loan, that's $2,500–$8,250. But here's the key: you can roll this fee into your loan. You don't need cash to pay it at closing.

Disabled veterans often get this fee waived completely. Check your eligibility.

What You Can (and Can't) Buy

VA loans only work for your primary residence, not vacation homes or pure investment properties.

But that two-to-four unit rule creates a loophole. Buy a duplex, live on one side, rent the other. That counts as a primary residence.

Real scenario: A veteran buys a $250,000 home with a VA loan. Zero down payment. Compare that to someone using a conventional loan who needs $12,500 down (5%). The veteran just saved over $12,000 upfront while getting a lower interest rate and no mortgage insurance.

Live Outside the City? USDA Loans Cover 97% of America

If you think "rural" means farmland and dirt roads, think again.

USDA loans work in suburbs, small towns, and even some areas near mid-size cities. About 97% of U.S. land qualifies, including much of Tennessee.

Who Qualifies for USDA Loans

USDA loans target low- to moderate-income buyers in eligible areas. To qualify:

• Your household income can't exceed 115% of the area's median income
• You need a minimum credit score of around 640 (slightly higher than VA loans)
• The property must be in a USDA-eligible area
• It must be your primary residence

"Moderate income" sounds limiting, but actually covers many middle-class families. A family of four might qualify with a household income of up to $90,000–$110,000, depending on the county.

Where USDA Loans Work

Check the USDA eligibility map online. You might be surprised—many suburban areas qualify.

In Tennessee, this includes much of the state outside the Nashville, Memphis, Knoxville, and Chattanooga metros. Even some areas near those cities still qualify.

Towns under 35,000 population that aren't part of larger metros often work. That includes places you wouldn't think of as "rural" at all.

Benefits and Costs

Like VA loans, USDA loans offer zero down payment and competitive interest rates.

The trade-off: USDA charges a 1% upfront guarantee fee plus a 0.35% annual fee. On a $200,000 loan, that's $2,000 upfront (which can be rolled into the loan) plus about $58 per month.

That’s still much cheaper than saving $40,000 for a traditional 20% down payment.

Can't Get a Zero-Down-Payment Mortgage? Low-Down-Payment Alternatives

Most buyers won't qualify for VA or USDA loans. That's okay—several programs require very small down payments instead.

FHA Loans: Just 3.5% Down

FHA loans are designed for first-time buyers and people with less-than-perfect credit.

Minimum down payment: 3.5% with a credit score of 580 or higher

FHA loans accept lower credit scores and higher debt-to-income ratios than conventional loans. This flexibility helps buyers who've had past credit issues or carry student loan debt.

The catch: You'll pay private mortgage insurance—both an upfront premium (1.75% of the loan) and an ongoing monthly fee. On most FHA loans, this insurance remains in effect for the life of the loan unless you refinance.

The math: A $200,000 house needs just $7,000 down (3.5%). Compare that to $40,000 for a traditional 20% down. That's $33,000 less you need to save.

FHA loans work for all types of buyers, not just first-timers. But they're especially popular among first-time homebuyers.

Conventional 97 Loans: Only 3% Down

Programs like Fannie Mae HomeReady and Freddie Mac Home Possible offer conventional loans with just 3% down.

These programs target buyers with low- to moderate-incomes. Income limits vary by county, so check your area's specific caps.

Requirements include:

• A minimum 3% down payment
• Completing a homebuyer education course (usually online, takes a few hours)
• Meeting income limits for your area
• A credit score typically 620+

Some HomeReady loans even offer a $2,500 credit toward closing costs for very low-income buyers.

You'll pay mortgage insurance until you reach 20% equity. But unlike FHA loans, you can cancel this insurance once you hit 20%—you're not stuck with it forever.

Medical Degree = Special Mortgage Options

Doctor loans (also called physician loans) recognize that doctors have high earning potential despite massive student loan debt.

These specialized programs offer zero or low down payments (some offer true $0 down) and no penalty for high student loan debt. They do require credit scores typically 680+ and an employment contract or proof of residency.

Doctor loans are primarily for physicians but may extend to:

• Medical residents and fellows
• Dentists
• Veterinarians (sometimes)
• Other medical professionals (varies by lender)

Nurses typically don't qualify for doctor loans, but they can access down payment assistance programs and low-down FHA or conventional loans instead.

The benefit: A medical resident with $300,000 in student loans might struggle to qualify for a traditional mortgage. A doctor loan ignores that debt burden and focuses on future income instead.

Five Ways to Cover Down Payment and Closing Costs

If you can't afford even 3–5% down, don't give up yet. Multiple programs and strategies can help.

1. Down Payment Assistance Programs

Almost every state offers help for down payments for first-time buyers or low- to moderate-income households.

These programs come as:

• Grants that never need repayment
• Forgivable loans that disappear after you live in the home for several years
• Deferred payment loans with zero interest that you repay when selling

Tennessee has several DPA programs through the Tennessee Housing Development Agency (THDA). Some cover down payment, others cover closing costs, and some cover both.

2. Gift Money From Family

Family members can gift you money for your down payment and closing costs. This is the simplest form of down payment help.

How it works:

• Family member gives you money (not a loan—it must be a gift)
• They provide a gift letter stating that the money doesn't need repayment
• Lender documents where the money came from

This money can cover your entire down payment. No limits.

3. Lender Credits

Some lenders will pay your closing costs in exchange for a slightly higher interest rate.

The trade-off: You save cash now but pay more each month for 30 years.

This strategy works if you're cash-poor but have a stable income. Run the numbers carefully—sometimes the long-term cost isn't worth the short-term savings.

Ask lenders about "zero closing cost" options. Just understand you're not really getting free closing costs—you're financing them through a higher rate.

4. Seller Concessions

In some markets, sellers may pay all or part of your closing costs.

This is more common when:

• It's a buyer's market with lots of homes available
• The house has been sitting unsold for months
• The seller is motivated to close quickly

Limits vary by loan type. Most conventional loans cap seller concessions at 3% if you're putting down less than 10%, or 6% if you're putting down 10–25%.

Your real estate agent can negotiate this during the offer. But in competitive markets, asking for seller concessions might weaken your offer.

5. Employer Assistance

Some employers offer homebuyer assistance programs, especially:

• Hospitals and healthcare systems
• Universities and colleges
• Large corporations
• Government employers

These programs might offer grants, forgivable loans, or matching funds for your down payment.

3 Things to Do This Week

1. Check your eligibility. Determine whether you qualify for a VA or USDA loan. Get your Certificate of Eligibility if you're a veteran. Look up your property area on the USDA map. Check your credit score and the median income in your area.
2. Research down payment assistance. Visit your state housing authority website. See which programs are available in your area. Many go unused because buyers don't apply.
3. Talk to family about gifts. If family might help with your down payment, have that conversation now. Knowing what's possible helps you plan.

Drawbacks of $0 Down Mortgages

Higher Monthly Payments

Borrowing 100% of the purchase price means a bigger loan and bigger payments.

Example:

• $200,000 home with 20% down = $160,000 loan = $955 monthly (at 7% interest)
• $200,000 home with 0% down = $200,000 loan = $1,331 monthly

That's $376 more every month. Over 30 years, that's $135,000 in additional payments.

More Interest Over Time

You pay interest on the full purchase price instead of a reduced loan amount.

On a $200,000 home at 7% for 30 years:

• 20% down = $183,920 total interest paid
• 0% down = $279,018 total interest paid

That's $95,000 extra in interest just because you didn't put money down.

Mortgage Insurance Requirements

Most loans with down payments of less than 20% require mortgage insurance.

• FHA loans: Pay 1.75% upfront plus 0.55–0.85% annually
• Conventional loans: Pay 0.25–2% annually until you reach 20% equity
• USDA loans: Pay 1% upfront plus 0.35% annually
• VA loans: No mortgage insurance (but funding fee applies)

On a $200,000 loan, that's typically $80–$200 monthly added to your payment.

Starting With Zero Equity

You own 0% of your home on day one.

This means:

• You can't tap home equity for emergencies
• If home values drop, you could owe more than the home is worth
• You can't access home equity lines of credit
• It takes years before you build any real wealth

Is this bad? Not necessarily. Buying with zero down gets you into a home now instead of waiting years to save. And you're building equity every month through your mortgage payments.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

Zero Down Homes Loans Are Possible

Buying a house with no money down is absolutely possible through VA and USDA loans.

These programs remove the biggest barrier to homeownership—saving a massive down payment. For qualified buyers, they’re outstanding opportunities.

If you don't qualify for zero-down options, FHA loans (3.5% down) and conventional 97 programs (3% down) still require far less than the old 20% standard.

And with down payment assistance, family gifts, and other strategies, you might cover even that small amount.

Zero-down mortgages mean higher monthly payments, more interest over time, and no initial equity. But they get you into a home now instead of waiting years to save.

Homeownership might be closer than you think.