our everyday life

How to Get a Mortgage Without a Deposit

by K.C. Hernandez, studioD

When buying a home, the deposit often goes toward your down payment. Your mortgage lender usually requires you to contribute a percentage of the sale price to the transaction as part of your investment in the transaction. A down payment typically ranges between 3.5 percent with the Federal Housing Administration (FHA) to 20 percent with most conventional lenders. However, a few credit unions and government agencies, such as the Department of Veterans Affairs (VA) and the Department of Agriculture (USDA) offer zero-down mortgages. When submitting an offer, you must specify a no-down-payment loan program and negotiate closing costs to receive a refund of your deposit.

Apply for a mortgage with your local credit union or a lending institution that offers zero-down mortgages. As of 2013, these loan programs are scarce among conventional lenders and usually only available to borrowers with low to moderate incomes who meet specific guidelines. Borrowers must have established good credit, carry a minimal debt load and occupy the home as their primary residence. VA loans apply to honorably discharged and active-duty military members and USDA loans apply to borrowers who want to purchase in designated rural, residential areas. The Department of Housing and Urban Development, or HUD, and certain lending institutions offer mortgages that can be used in conjunction with down payment assistance programs provided by approved state agencies and non-profits.

Make an offer to buy a home with an earnest money deposit that equals 1 percent to 2 percent of the offering price. Sellers seldom accept offers with no money on the line. Your earnest or good faith deposit shows the seller that you intend to fulfill your contract obligations in a timely manner to buy the home. Failing to do so jeopardizes your deposit because the seller can cancel the agreement and keep all or a portion of the deposit as damages.

Provide the details about your financing. Real estate contracts usually require disclosure of the type of financing you intend to obtain, such as conventional or government-insured. Contracts also ask you to specify initial deposit and down payment amounts. Such information allows the seller to determine how much money you'll need to come in with at closing to complete the purchase price and cover any buyer closing costs. Be prepared to prove that you have sufficient funds to deposit.

Ask the seller to cover all of your closing costs and specify that you intend to receive a refund of your good faith deposit at closing. Most lenders allow the seller to contribute 3 percent to 6 percent of the sale price to cover buyer closing costs. By negotiating to have the seller pay all of your closing costs and by obtaining a zero-down-payment mortgage, you are entitled to a refund of your deposit at closing -- there are no buyer costs that require use of the deposit.


  • Typical real estate contracts state that the deposit must be made into a trust or escrow account within a few days of signing the agreement. Most contracts also require specifics on how you plan to fund the purchase. Failing to provide information on either one of these important aspects of the contract will likely lead to a rejection of your offer.
  • The seller may require proof of funds in the form of a recent account statement to ensure that you have money for the deposit before accepting your offer.

About the Author

K.C. Hernandez has covered real estate topics since 2009. She is a licensed real estate salesperson in San Diego since 2004. Her articles have appeared in community newspapers but her work is mostly online. Hernandez has a Bachelor of Arts in English from UCLA and works as the real estate expert for Demand Media Studios.

Photo Credits

  • David Sacks/Lifesize/Getty Images