How to Buy a Second Home with No Down Payment

Read Time: 3min
Last Updated: 5/19/2021

With so much buzz around down payment requirements for purchasing your first home, it’s easy to assume you’ll need one to buy a second home, too. Truth be told, there are a few suggestions on how to buy a second home with no down payment saved up. But first, let’s look at why lenders prefer down payments in the first place to give you a better idea about why down payments are so popular amongst mortgage lenders.

The Purpose of a Down Payment

A mortgage lender’s job is to choose borrowers they believe possess the least amount of risk when it comes to paying back their mortgage. A down payment is the borrower’s way of showing the lender they can pay their home loan and aren’t going to be a risky investment. A down payment is applied to your loan balance when you close on your home loan and helps minimize the total amount borrowed from the lender. Mortgage loans with down payments less than 20%, for example, are subject to private mortgage insurance (PMI), an additional cost to the borrower attached by the lender. In the event that the borrower fails to pay their mortgage, the private mortgage insurance company pays the lender.

How To Buy a Second Home with No Down Payment

Despite the logical reasoning behind down payments, repeat home buyers still have options for purchasing that second home with no down payment.

Finance With a Government Insured Loan

USDA and VA home loans allow borrowers to buy homes with no down payment. For example, USDA loans are available to eligible buyers looking to purchase homes in eligible rural areas (and even some suburban areas) around the country. There is one catch: borrowers looking to finance their second home with a USDA loan must use the home as a primary residence rather than an investment property or vacation home. This could mean you rent out your first home and make your second home your primary residence.

Following the same guidelines as USDA loans, VA loans are another zero down payment mortgage option available exclusively to past or present military members. Keep in mind that buying a home with no down payment means you’ll be financing more mortgage over the life of your loan. Use our simple mortgage calculator to see how this difference in down payment affects your monthly mortgage payment.

Turn Your Home Equity Into Cash

If you’re wondering how to buy a second home with no down payment readily available, or you’re looking to purchase an investment property/vacation home as your second home but don’t have a down payment ready, consider tapping into your home equity as a down payment source. A cash out refinance allows you to borrow up to 80-85% of your home’s value while potentially lowering the interest rate, term (or both) on your first home while helping you make a second home purchase.

Finance With a Low Down Payment Option

Let’s say the last two options don’t work for you. While there is little left to be offered for a zero-down mortgage option, you may find luck financing your second home with other loan options. For example, FHA loans require only 3.5% down at closing, while conventional loans require only 3% with qualifying credit scores and loan terms. There is one caveat, though. Both loan options require you to qualify as a first time home buyer in order to take advantage of their low rates.


If you’ve got more questions to ask a loan officer about how to buy a second home with no down payment, consider chatting with Wyndham Capital Mortgage. We’re the online mortgage lenders with the knowledge and know-how to get you into a home loan that meets your needs and financial goals. We make it easy to compare mortgage rates, apply for and close on a home 100% online.



Matthew Harris is the Internal Communications Manager at Wyndham Capital Mortgage. With over 11 years of experience writing and creating content about topics from sports and culture to financial systems and business, Matthew brings his expertise to the mortgage industry. Matthew oversees Wyndham’s internal communication and content strategies to help drive the internal messaging and creating content that gives both employees and borrowers relevant and reliable information to help them make informed homebuying, selling and refinancing decisions. Matthew has a Master’s Degree in Communications from Purdue University and a Bachelor's Degree in Journalism from Appalachian State University. His interests include social media marketing, content creation and catching the occasional sports game.

Related Posts