Loan types
USDA loans: 0% down in eligible rural and suburban areas
Quick answer
A USDA loan is a 0% down mortgage guaranteed by the U.S. Department of Agriculture for moderate-income buyers in eligible rural and many suburban areas. Household income must be at or below 115% of area median income. It charges a 1% upfront guarantee fee and a 0.35% annual fee, lower than FHA mortgage insurance.
Many buyers skip USDA loans because they assume "rural" means farmland. In practice, a large share of the country qualifies, including many small towns and outer suburbs. If you fit the income limit and the home is in an eligible area, it is one of the cheapest ways to buy with no money down.
What a USDA loan is
The program most buyers use is the USDA Single Family Housing Guaranteed Loan. A private lender makes the loan and USDA Rural Development guarantees it. (There's also a separate Direct loan program for very-low-income buyers, made by USDA itself, with subsidized rates and long wait times.)
A real example
On a $300,000 home with 0% down, the 1% upfront guarantee fee is $3,000, usually financed for a loan of $303,000. The 0.35% annual fee adds about $88 a month in year one. The same home with FHA would need $10,500 down and about $130 a month in mortgage insurance.
The three eligibility tests
1. Location. The property must be in a USDA-eligible area. Check any address on the USDA eligibility map before you shop — the boundaries surprise people in both directions.
2. Household income. Total household income must be at or below 115% of the area median income for your county and household size. This counts everyone who will live in the home, including adults who won't be on the loan. Childcare and some other costs can be deducted.
3. Occupancy and property. The home must be your primary residence and a modest single-family home, eligible condo or qualifying manufactured home. Investment properties, second homes and income-producing farms don't qualify.
Fees
| Fee | USDA | FHA for comparison |
|---|---|---|
| Upfront | 1% of loan (can be financed) | 1.75% |
| Annual | 0.35% of remaining balance | 0.15%–0.75%, most pay 0.50–0.55% |
| How long annual fee lasts | Life of the loan | Life of loan with under 10% down |
Credit and DTI guidelines
USDA has no official minimum credit score, but a score of 640 or higher qualifies for automated approval through USDA's underwriting system. Lower scores may still be approved through manual underwriting. The standard debt-to-income guideline is 29% for housing and 41% for total debt, with higher ratios allowed when you have compensating factors such as savings or a strong job history.
Closing costs
USDA has no down payment, but you still have closing costs. Options to cover them: seller concessions (up to 6% of the price), lender credits, gift funds, or financing them into the loan if the home appraises above the price.
Who USDA fits best
USDA works best for moderate-income buyers with limited savings who are happy to live outside major metro cores. If your income is above 115% of AMI, or you're buying in a city, look at conventional loans with 3% down or down payment assistance instead.
Frequently asked questions
Do I have to be a first-time homebuyer?
No. You don't have to be a first-time buyer, but you generally can't own another adequate home in the same area when you close.
How long does a USDA loan take to close?
Usually a bit longer than conventional — often 30 to 60 days — because the file is reviewed by the lender and then by USDA. Ask your lender about current USDA turn times when you write your offer.
Can I use a USDA loan for a fixer-upper?
The home must meet USDA property standards at closing. Minor issues can sometimes be handled with an escrow holdback, but homes needing major repairs usually won't qualify for a standard USDA purchase loan.
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Take the readiness assessment Take the readiness assessment →This article is educational and general in nature. Loan eligibility, rates, and requirements vary by lender, loan program, and your individual situation. Confirm specifics with a licensed lender.