USDA Loans: How to Buy a Home With $0 Down

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Here's a loan program that doesn't get nearly enough attention. USDA loans let you buy a home with absolutely zero down payment, and no, you don't need to buy a farm. Most people hear "USDA" and think cornfields, but the reality is that about 97% of the U.S. land mass qualifies. Suburbs, small cities, even some areas that feel pretty urban. If you're not buying in the middle of a major metro, there's a decent chance you're eligible.

What Makes USDA Loans Special

• $0 down payment - Just like VA loans, but you don't need military service. Zero. Nothing. Nada at closing for the down payment.
• Lower mortgage insurance than FHA - USDA charges a 1% upfront guarantee fee and 0.35% annually, compared to FHA's 1.75% upfront and 0.55% annually. On a $250,000 loan, that's about $50/month less in mortgage insurance.
• Competitive interest rates - Because the government backs these loans, rates tend to be at or below market.
• Flexible credit requirements - Most lenders want 640+, but manual underwriting is available for lower scores.
• Closing costs can be financed - If the home appraises for more than the purchase price, you can roll closing costs into the loan.

The Two Big Requirements

USDA loans have two restrictions that other loan types don't:

1. Location - The Property Must Be in an Eligible Area

The USDA defines "rural" pretty generously. Towns with up to 35,000 people often qualify. Plenty of suburban developments with Target stores and good school districts are in eligible zones. The only places that are definitely out are major metro areas - think downtown Chicago, not the suburbs 30 miles out.

Before you do anything else, check the USDA eligibility map on their website. Plug in the address and it'll tell you instantly. I've seen people assume they don't qualify and then be pleasantly surprised. Worth 30 seconds of your time to check.

2. Income - Your Household Income Must Be Below the Limit

USDA loans are meant for moderate-income borrowers. The limit is usually 115% of the area median income, and it counts everyone in the household, not just the people on the loan.

Important note: this is gross household income, and it includes income from everyone living in the home, even non-borrowers. If you make $80,000 and your spouse makes $40,000, your household income is $120,000 - which might exceed the limit in some areas.

USDA vs FHA vs Conventional

What USDA Loans Can't Be Used For

A few things to know upfront:

• Investment properties and second homes are out - primary residence only
• The home has to be "modest" for the area - no mansions (there are loan limits by county)
• Working farms, income-producing properties, and lots with structures not suited for year-round living don't qualify
• No in-ground swimming pools on existing homes (new construction is sometimes okay, weirdly enough)

Getting Started with a USDA Loan

1. Check the USDA eligibility map - Make sure the areas you're looking at qualify
2. Check income eligibility - Use the USDA income tool for your county
3. Get your credit in shape - Aim for 640+. If you're below that, our guide on building credit can help
4. Find a USDA-approved lender - Not every lender does USDA loans, so ask upfront
5. Get pre-approved - This shows sellers you're serious and tells you exactly what you can afford

USDA loans are genuinely one of the best-kept secrets in home financing. Zero down, low mortgage insurance, and you might already live in or near an eligible area without knowing it. If you're priced out of the big city anyway, this could be the thing that makes homeownership happen.

Trying to figure out whether buying or renting makes more sense? Our Rent vs Buy Calculator breaks it all down. And if you're also exploring other options, check out our guides on FHA loans and VA home loans for veterans.