April 14, 2024

Business Bib

Business & Finance Blog

Is a No Down Payment for First-Time Home Buyers Right for Me

4 min read

As a first-time home buyer, you may feel like getting a no-down-payment mortgage is the right choice for you. After all, getting one of these means you don’t need to save as much money, you can get your mortgage more quickly, and you don’t have a down payment tied up for the length of the mortgage.

It’s important to consider all aspects of this option, however. It isn’t right for every home buyer. For instance, when you haven’t put any money in, you owe more overall and have no equity in the property. Also, you might be labeled a high-risk borrower. This could mean that you will have to pay for private mortgage insurance, which is an additional cost. Zero-down-payment mortgages also can come with higher interest rates than traditional mortgages.

In this article, we look at all of these elements in detail, helping you to decide what the best choice is for you when you are a first-time home buyer.


Here are a few of the positive aspects of getting a no-down-payment mortgage as a first-time buyer:

You Don’t Have to Save for a Down Payment

One of the main advantages is that you don’t need to save for a down payment. Traditionally, a down payment of 20 percent of the home’s purchase price was expected. This can be a significant sum of money, especially for first-time home buyers. It takes time and planning and can seriously affect other parts of your budget, such as repaying other loans or debt or preparing to expand your family.

You Can Get a Mortgage Faster

When you don’t have to save for a down payment, another positive aspect becomes evident: you can get your mortgage faster. This means you can move into your new home sooner than if you need to wait and put together the down payment. For some people, this could be the deciding factor when it comes to whether they will get a no-down-payment mortgage.

You Don’t Have Lots of Money Tied Up in Your House

When you put down a large sum of money as a down payment, you are essentially tying up that money for a significant amount of time. It can take years to build up those kinds of savings again. With no down payment, you don’t have to worry about this. Not putting down money means you are free to spend your savings in other useful ways. Options such as purchasing a vehicle or using the cash to make renovations to your new house become possible.


There are some potential cons of a no-down-payment mortgage:

You Owe More on the Property

One of the most obvious disadvantages is that without a down payment, the homeowner owes more money on the loan and has no equity in the home. This could mean higher monthly payments and some time before your home becomes an asset you can leverage.

You May Be Labelled as a High-Risk Borrower

As a high-risk borrower, you will likely need to pay for private mortgage insurance (PMI), which is an additional monthly cost. Mortgage insurance is not tax-deductible like mortgage payments are.

Higher risk can also mean higher interest rates.

You Could Have to Pay a Higher Interest Rate

Zero-down-payment mortgages often come with higher interest rates than traditional mortgages. This means that you will ultimately end up paying more for your house over the life of the loan.

These are some of the pros and cons of getting a no-down-payment mortgage. It’s important that you consider all of the elements before you make a decision. Ultimately, the choice is yours, and you need to decide what is best for your individual circumstances.

Before you take out a no-down-payment mortgage, it is worth considering the long-term consequences. If you choose to put down money for a mortgage, could you be in a better financial situation in years to come?

Ways of Getting a No-Down-Payment Mortgage for First-Time Buyers

Here are a few of the ways that first-time homebuyers can get a home loan with no down payment.

VA Home Loan

If you are a veteran, you may be eligible for a VA home loan. This is a great program that allows you to purchase a home with no down payment. You will need to meet certain eligibility requirements, but if you do, this can be a great way to get into a home with no money down.

USDA Rural Development Single Family Housing Program

The USDA Rural Development Single Family Housing Programs also offers no down payment mortgages to eligible borrowers. This program is usually for rural areas, but you may sometimes be able to get one of these if you live closer to a town. Do your research or talk to your lender if you’re interested.

Other Methods of Getting a No-Down-Payment Mortgage

There are other ways to get a no-down-payment mortgage as well. Some banks and credit unions offer programs with no down payment for first-time home buyers that allow you to put no money down. You will need to check with your lending institution to see if they offer any programs like this.

No Down Payment Mortgages: Sometimes the Right Choice for New Homeowners

No down payment mortgages can be a great way to get into a home without having to save for a down payment. You will need to check your eligibility for these programs, but if you do qualify, this can be a great way to get into a home.

Interested in learning more about whether a first-time home buyer loan with no down payment might be the right option for you? Contact a home loan expert at Solarity Credit Union. They can help you get started on your journey to homeownership.