Key Takeaways
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USDA loans offer zero down payment, making them ideal for buyers without large savings.
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Eligibility is based on location, income, and occupancy, not credit score alone.
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Closing costs can be covered through gift funds, loan roll-in, or assistance programs.
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A USDA loan provides 100% financing, helping buyers in rural and suburban areas become homeowners.
For many first-time buyers, saving for a down payment can delay homeownership for years. Fortunately, a USDA loan offers a solution. Designed for low- to moderate-income buyers, USDA loans require no down payment and are available in eligible rural and suburban areas. With 100% financing, they make homeownership far more accessible—especially for those with limited savings.
What Is a USDA Loan?
A USDA loan is a government-backed mortgage issued by approved lenders and guaranteed by the U.S. Department of Agriculture. It’s aimed at making homeownership possible in rural regions and underserved communities. One of its biggest advantages is zero down payment, which means buyers can finance 100% of the home’s purchase price.
| Feature | Details |
| Backed By | U.S. Department of Agriculture (USDA) |
| Down Payment Requirement | $0 |
| Eligible Areas | Rural and certain suburban locations |
| Primary Residence Required | Yes |
| Credit Score Guidelines | Typically 620+ (some flexibility allowed) |
USDA Loan Eligibility Requirements
To benefit from a USDA loan, borrowers must meet a few key criteria:
1. Location Eligibility
The home must be in a USDA-eligible area. While these areas are generally rural, some suburban neighborhoods also qualify. You can use the USDA eligibility map to check a property.
2. Income Limits
Borrowers must earn less than 115% of the area median income (AMI). USDA considers the total household income, including non-borrowers, and allows adjustments for dependents and childcare expenses.
3. Occupancy Requirement
Only primary residences are eligible. Vacation homes and investment properties do not qualify.
4. Property Type
Qualifying properties include:
| Eligible Properties |
| Single-family homes |
| Approved condos |
| Planned Unit Developments (PUDs) |
| Manufactured homes (extra requirements apply) |
Do You Need Any Money Out of Pocket?
While USDA loans eliminate the need for a down payment, closing costs still apply. These usually range from 3% to 5% of the loan amount.
Fortunately, you have several ways to cover USDA closing costs:
| Option | Details |
| Roll into Loan Amount | If the appraised value exceeds the purchase price |
| Use Gift Funds | Accepted from family members or approved donors |
| Down Payment Assistance | Apply for state or local grants and assistance programs |
Credit Score and Debt-to-Income (DTI) Requirements
Most lenders require a minimum credit score of 620, although exceptions exist. Borrowers with lower scores may still qualify if they demonstrate strong financial compensating factors.
Additionally, your debt-to-income ratio (DTI) must meet lender guidelines. Typically, the DTI should not exceed 41%, but flexibility may be granted in certain cases.
Is a USDA Loan Right for You?
A USDA loan is an ideal fit if you:
- Are buying a home in a rural or suburban area
- Meet income eligibility standards
- Want 100% financing with no down payment
- Plan to live in the home as your primary residence
If these factors align, this program could be your most affordable route to owning a home. Connect with a USDA-approved lender to verify your eligibility, explore zero down payment options, and get assistance with closing costs if needed.
FAQs: USDA Loans
No SSN required. Zero impact to credit. Your Information is never sold.
