How to buy a second home with no money down: Strategies that can work

What you'll learn ✅

— How to finance a second house with little or no up-front cash

— How home equity credit, government programs, and seller financing work

— The pros and cons of seeking low or no down payment options

Buying a second home is an exciting opportunity. Maybe you’re looking to own a summer cabin or a condo you can rent out on weekends. While the expenses can seem a little daunting, when you explore how to buy a second home with no money down, that dream can become a reality faster than you think.

The truth is, a down payment on a second house doesn’t have to be as daunting as you expect. In this guide, explore no-money-down options and affordable alternatives to help you secure your next home.

Can you buy a second home with no money down?

Yes, you can buy a second home with no money down, but it’s not the norm. 

A second home loan usually comes with stricter requirements than your first conventional loan, and the up-front costs reflect that. Many lenders expect a down payment of at least 10% and sometimes closer to 20%. They may also have tighter requirements for credit score and debt-to-income ratio. 

Lenders build this extra protection into the terms because second homes are considered higher risk. Most people prioritize payments on their current primary residence, which makes them more likely to default on the second.

That’s why many people looking to buy a second house want a way to lower the expense. Only a few methods remove the down payment entirely, such as securing VA or USDA loans. Most of the remaining options focus on lowering what you need to bring to closing, like using your existing home’s equity or sharing costs with another buyer.

How do you purchase a second home with no money down?

Here are some approaches to buy a second home with no down payment.

Secure a government-backed loan

Some federal loan programs allow qualified buyers to move into a property with little or no money down, as long as they plan to live in the new home as their primary residence. 

VA loans, for example, may allow 0% down payments for eligible military service members, veterans, and surviving spouses. Home buyers will need to move into the house as their new primary residence while keeping their first property as a second house or rental. 

USDA loans can also offer 0% down in qualifying rural and select suburban areas. These programs also require you to use the property as your main home.

Look into seller financing

In a seller-financed deal, the seller acts as your lender instead of a bank or mortgage company. 

Because you’re working directly with the seller, there’s often more room to adjust the down payment. Some sellers are open to no up-front costs if they want to sell quickly. In exchange, you may pay a higher rate or agree to pay off the loan over a shorter period. 

How do you buy a second home with a low down payment?

Reducing the necessary cash is sometimes more realistic than achieving 0% down. Here are a few ways to buy a second home with a minimum down payment.

Try a rent-to-own agreement

With a rent-to-own or lease-option arrangement, you rent a property for a set period and gain the right to buy it later. A portion of your rent may count toward the future purchase price.

This approach gives you time to live in the home, get to know the neighborhood, and continue building up your savings. When it’s time to buy, you may be able to finance the home with little cash beyond closing costs. This is because some of what you already paid in rent can count toward the asking price.

Rent-to-own agreements can vary widely, so be sure to review the terms with a professional and understand what happens if you decide not to buy.

Tap into your home equity

If you already own a home with high equity, you may be able to borrow against it and use those funds toward the second home’s costs. This is called a home equity line of credit, or HELOC. While this doesn’t reduce the total cost, it lowers the amount you need to pay up front.

If you’re looking to borrow against your home, check out Better’s One Day HELOC. It gives qualified homeowners quick access to up to 90% of their home’s value. Better helps you move forward with your plans fast — you’ll have access to your cash in as little as seven days.

Buy with a partner or co-borrower

You can reduce your costs at closing by buying the home with a co-borrower. A partner might contribute a significant amount of the down payment in exchange for a larger ownership share, while you take on more of the monthly mortgage payments or handle property management. 

Look into getting an assumable mortgage

If the seller has a loan you’re allowed to take over, you may be able to buy the home by covering only the difference between what they owe and the sale price. When that gap is small enough, the cash you need can be much lower than a typical second home down payment.

What are the pros and cons of buying a second home with no money down?

While it’s an attractive idea, aiming for 0% down may not work for everyone. Let’s take a look at the pros and cons to see if it’s for you.

Pros of buying a second home with no money down

Buying a second home with little or no up-front cash can give you more flexibility, whether you’re trying to move quickly on a property or keep more of your savings available. Here are a few advantages:

— You spend less up front: Keeping more money in your savings or emergency fund can make the purchase feel more manageable. 

— You can act sooner: Using equity or a low-down-payment option can help you secure the home without needing to save up as long.

— Your money can stay in play elsewhere: A second home can support long-term equity growth and potential rental income while your cash remains free for other opportunities.

Cons of buying a second home with no money down

A no-money-down strategy comes with tradeoffs that can shape your long-term costs and options. Here are a few drawbacks:

— Fewer choices and tighter requirements: Not all lenders offer programs that allow little to no up-front cash, and qualifying can be harder when you already own a home.

— Higher interest rates: No down payment means you’re borrowing the full amount, which typically translates to higher interest rates. Some lenders may also increase interest due to the inherent risk of second home loans.

— Required mortgage insurance: If you put very little down, you may need to get mortgage insurance, which adds an extra charge to your monthly payment.

Secure a second home your way with Better

A low or no-money-down financing plan helps you move forward on your housing plans sooner, whether you opt for a HELOC or pursue a government-backed loan. If you see a strategy that fits your situation, reach out to Better for personalized assistance

With Better, you can apply in minutes and start talking to our experts about different down payments and mortgages. Get tailored advice on your options, then move forward and track your progress on our intuitive digital dashboard. 

Ready to explore what a second home might look like for you? Let Better guide you on your next journey.

...in as little as 3 minutes – no credit impact

FAQ

Can I use future rental income from a second home to help me qualify for financing?

Some lenders may let you count expected rental income if you have experience managing rentals or show enough savings. They may also request an appraisal with projected rental amounts and adjust those figures to reflect possible vacancies and expenses.

How much income or return can I expect if I rent out my second home?

That depends on location, local demand, and how often you plan to use the home yourself. A local real estate agent or property manager can help you estimate average nightly or monthly rates, occupancy, and utility costs. From there, you can see whether that income would cover part of your monthly payment.