USDA Loan Guide: How to Buy a Home With Zero Down Payment in 2026

Most first-time buyers assume they need a big down payment to buy a house. That's not always true. The USDA Rural Development Guaranteed Loan Program lets you finance 100% of the home's purchase price — meaning zero down payment.

If you're buying in a qualifying area (and more places qualify than you'd think), a USDA loan could save you tens of thousands of dollars upfront.

This guide covers exactly how USDA loans work, who qualifies, and how to apply.

What Is a USDA Loan?

A USDA loan is a mortgage backed by the U.S. Department of Agriculture through its Rural Development (RD) program. The program was created to help moderate-income households buy homes in rural and suburban areas.

There are two types:

• USDA Guaranteed Loans (Section 502): The most common type. A private lender (bank, credit union, or mortgage company) issues the loan, and the USDA guarantees it against default. This is what most people mean when they say "USDA loan."
• USDA Direct Loans: The USDA itself lends the money directly to very low-income borrowers. These have stricter income limits and longer processing times.

This guide focuses on the Guaranteed Loan program since that's what the vast majority of buyers use.

Why USDA Loans Are Worth Considering

Here's what makes USDA loans stand out:

Zero Down Payment

This is the headline feature. While FHA loans require 3.5% down and conventional loans typically require 3–5%, USDA loans require nothing down. On a $250,000 home, that's $8,750 to $12,500 you don't need to save.

Below-Market Interest Rates

USDA loan rates are typically 0.25% to 0.50% lower than conventional mortgage rates. Over 30 years on a $250,000 loan, even a 0.25% difference saves you roughly $13,000 in interest.

Lower Mortgage Insurance Costs

USDA loans charge two types of fees:

• Upfront Guarantee Fee: 1.0% of the loan amount (can be rolled into the loan)
• Annual Fee: 0.35% of the remaining loan balance, paid monthly

Compare that to FHA's 1.75% upfront mortgage insurance premium and 0.55% annual MIP. On a $250,000 loan, USDA saves you about $1,875 upfront and roughly $500 per year.

Flexible Credit Requirements

Most USDA-approved lenders look for a 640+ credit score for automated approval. Below 640, manual underwriting is possible but expect more [documentation](/blog/heloc-documentation-requirements) and slower processing.

[Closing Costs](/blog/homebuying-closing-process) Can Be Financed

If the home appraises for more than the purchase price, you can roll closing costs into the loan. You can also use [seller concessions](/blog/seller-concessions-guide) — the seller can contribute up to 6% of the purchase price toward your closing costs.

USDA Loan Eligibility Requirements

Location Requirements

The property must be in a USDA-eligible area. Here's the part that surprises people: roughly 97% of U.S. land area qualifies, covering about 1 in 3 Americans.

Eligible areas include:

• Towns with populations under 35,000
• Suburban areas outside major metros
• Many commuter communities near cities

Use the USDA Eligibility Map to check any address. Just type in the property address and the map tells you instantly.

Income Limits

USDA loans are for moderate-income households. Your total household income (everyone living in the home who is 18+, not just the borrowers) cannot exceed 115% of the area median income (AMI).

Income limits vary by county and household size. For 2025–2026, typical limits are:

Check exact limits for your county on the USDA income eligibility tool.

Important: The USDA counts all household income, not just the borrower's. If your adult child lives with you and works, their income counts toward the limit even if they're not on the loan.

Property Requirements

• Must be a primary residence (no investment properties or vacation homes)
• Must be a single-family home, condo, townhouse, or [manufactured](/blog/heloc-on-manufactured-home) home on a permanent foundation
• Must meet minimum property standards (safe, sanitary, structurally sound)
• Must not have an in-ground swimming pool (for direct loans; guaranteed loans allow pools)
• Cannot be income-producing (no working farms or businesses on the property)

Borrower Requirements

• U.S. citizen, U.S. non-citizen national, or qualified alien
• Must not be suspended or debarred from federal programs
• Must demonstrate a willingness and ability to repay (stable income, acceptable credit history)
• Typically need a 640+ credit score for streamlined processing
• No specific [debt-to-income ratio](/blog/dti-ratio-explained) cap, but most lenders prefer 41% or below (exceptions possible with compensating factors)

How to Apply for a USDA Loan: Step by Step

Step 1: Check Eligibility

Before you do anything else, verify two things:

1. The area you want to buy in is USDA-eligible (use the online map)
2. Your household income falls within limits (use the income tool)

Step 2: Find a USDA-Approved Lender

Not every lender offers USDA loans. Look for lenders experienced with the program — they'll know how to navigate the USDA's approval process, which adds an extra layer beyond standard underwriting.

Step 3: Get Pre-Approved

Gather your documents:

• Pay stubs (last 30 days)
• W-2s and tax returns (last 2 years)
• Bank statements (last 2 months)
• Employment verification
• Photo ID

The lender will pull your credit, verify your income, and issue a pre-approval letter.

Step 4: Find a Home in an Eligible Area

Work with a real estate agent who knows your target areas. Make sure every property you consider is in a USDA-eligible zone before making an offer.

Step 5: Make an Offer and Get Under Contract

Once your offer is accepted, the lender orders an appraisal. USDA appraisals check both value and property condition — the home must meet USDA's minimum standards.

Step 6: Dual Approval Process

Here's where USDA loans differ from others. After the lender approves your file, it goes to the USDA for a second review. This typically takes 3–5 business days but can take longer during busy periods.

Step 7: Close on the Home

Once you have both lender and USDA approval, you schedule closing. Total timeline from application to closing is typically 30–60 days.

USDA Loan vs. FHA Loan vs. Conventional Loan

Common USDA Loan Myths

"USDA loans are only for farms." Wrong. They're for regular homes in qualifying areas. You don't need any agricultural connection.

"Only rural areas qualify." Many suburbs and small cities qualify. Check the map — you might be surprised.

"USDA loans take forever." They add 1–2 weeks compared to conventional loans because of the dual approval process. Most close in 45 days.

"You can't buy a nice home with a USDA loan." There's no maximum purchase price. The loan amount is limited by your income and debt ratios, not by an arbitrary cap.

Frequently Asked Questions

Can I use a USDA loan if I've owned a home before?

Yes. Despite being popular with first-time buyers, USDA loans don't require you to be a first-time homebuyer. However, you typically can't own another adequate home at the time of closing.

What if my income is slightly over the limit?

The USDA allows certain deductions from household income, including childcare expenses for children under 12, disability-related expenses, and care of elderly household members. After deductions, you may still qualify.

Can I build a home with a USDA loan?

Yes. The USDA offers a [construction-to-permanent loan](/blog/construction-loan-types) option, though fewer lenders offer this, and the process is more complex.

Do USDA loans have PMI?

Not traditional PMI. They have a guarantee fee (1.0% upfront + 0.35% annual) that functions similarly but costs less than FHA's mortgage insurance.

Can I refinance a USDA loan?

Yes. USDA offers a streamlined refinance program for existing USDA loans that requires minimal documentation and no new appraisal.

What happens if my area loses USDA eligibility after I buy?

Your loan terms don't change. Eligibility is determined at the time of purchase.

Bottom Line

If you're buying a home in a qualifying area and your household income is within limits, a USDA loan is one of the best mortgage options available. Zero down payment, low interest rates, and affordable mortgage insurance make it hard to beat.

Start by checking the USDA eligibility map for your target areas. If the location qualifies, talk to a USDA-approved lender to see how much you can afford. You might be closer to homeownership than you think.

Related Articles

• [USDA Loan Guide 2026: Zero Down Payment in Rural Areas](/blog/usda-loan-complete-guide)
• [[Conventional Loan Requirements](/blog/conventional-loan-requirements) 2026: Complete Guide](/blog/conventional-loan-complete-guide)
• How to Get a 700 Credit Score: Step-by-Step Plan