Buy A Second Home With No Down Payment (2024)

Despite stricter lender requirements, you can see how to buy a second home with no money down. Take a look at a few options through a few types of government-backed loans.

Government-Backed Loans

Government-backed loans offer no and low down payment options. However, you cannot use a government-backed loan for a second home.Where this gets interesting is if you're looking to move and want to hold onto your current home as an investment property or second home.

You can use a USDA or VA loan to get a new primary residence with 0% down while also converting your current property to a vacation home or rental. The most important thing to remember is that you have to be living in the home for which you're getting the government-backed loan.

USDA

You can get a United States Department of Agriculture (USDA) loan with 0% down payment if you meet eligibility requirements and the property you plan to buy exists in a USDA-eligible tract of land. These locations primarily exist in rural areas. However, you could potentially find a USDA loan in some suburban areas as well. It’s important to note that Rocket Mortgage^® does not offer USDA loans.

A few requirements you must meet to qualify for a USDA loan:

You must qualify as a U.S. resident, noncitizen national or qualified alien.
It must be your primary residence.
Your adjusted gross income can’t tally up to more than 115% of the median income in the area.
You must show that you have a stable income and can make your mortgage payments based on your assets, savings and current income.
The total amount you spend on housing should be no more than 29% of your gross (pretax) income each month. Your overall minimum debt payments can comprise no more than 41% of your monthly income.
Many lenders require that you have a credit score of about 640 or better.

VA Loans

You can qualify for a Department of Veterans Affairs (VA) loan if you meet eligibility requirements as a member or veteran of the U.S. Armed Forces. VA loans require 0% down payment.

In order to qualify for a VA loan, you must meet at least one of these criteria:

You served 181 days of active service during peacetime or 90 consecutive days of active service during wartime.
You served more than 6 years of service with the National Guard or Reserves. You can also qualify with 90 days service under Title 32, with at least 30 days of consecutive service.
Service time requirements don't apply if you've been discharged due to a service-connected disability.
You’re eligible if you’re the spouse of a service member who lost their life in the line of duty or the spouse of a service member that suffered a service-related disability.
You secured a COE, a document that shows your eligibility for a VA loan.
Rocket Mortgage requires a minimum median credit score of 580. Other lenders may have different policies because the VA doesn't have a specific mandate.

When it comes to VA loans, you can get a one-time restoration of your full VA entitlement if you've fully paid off your prior VA loan. This would allow you to purchase your next primary property with a new VA loan while retaining your existing home to be converted to a vacation home or investment property.

Assumable Mortgages

Under some circ*mstances, you may assume an FHA or VA mortgage from the home seller through an assumable mortgage. This means that the buyer can take over the seller's mortgage. When you assume a mortgage, you do not need to make a down payment. Buyers may want to do this to finance at a seller's lower interest rates if rates have risen since the seller bought the home.

Check with your lender to find out if you can assume a mortgage if you want to go this route. The lender may have reserved the right to approve the home buyer in order for the assumption to occur.

Tapping Home Equity

Homeowners can use a cash-out refinance or a home equity loan to take cash out of their primary residence and use it to buy a second property. However, the 2017 Tax Cuts and Jobs Act eliminated the mortgage interest deduction on home equity loans unless you use the proceeds for capital improvements on the home.

Reverse Mortgage

If you want a second home but you're not sure if you can afford mortgage payments, property taxes and more, you can consider using the proceeds from a reverse mortgage to pay for your second home. The catch? You must be aged 62 or older.

In reverse mortgages, owners must stay in the home as their primary residence. However, you still consider it a primary residence if you spend more than half of your time in your primary home. Rocket Mortgage does not offer reverse mortgages.