USDA Loans: Zero Down Mortgages for Rural Areas (2026)
By Wealthvieu · Updated
USDA loans are one of the only true zero-down-payment mortgages available. If you’re buying in an eligible area, this program can save you thousands compared to FHA or conventional financing.
Table of Contents
USDA Loan Basics
Feature
Details
Down payment
$0
Mortgage insurance
1% upfront + 0.35% annual
Min. credit score (USDA guideline)
640 for automatic approval
Min. credit score (manual underwriting)
580-639 possible with manual review
Income limit
115% of area median income
Property location
Must be in USDA-eligible area
Property type
Primary residence only
Loan term
30 years (fixed rate only)
Seller concessions
Up to 6% of sale price
USDA vs. FHA vs. VA vs. Conventional
Feature
USDA
FHA
VA
Conventional
Down payment
0%
3.5%
0%
3-5%
Upfront fee
1.0%
1.75%
2.15%
None
Annual MI/MIP
0.35%
0.55%
None
0.3-1.5% (PMI)
MI duration
Life of loan
Life of loan (< 10% down)
N/A
Until 78-80% LTV
Income limits
Yes (115% AMI)
No
No
No
Location restriction
USDA-eligible areas
None
None
None
Credit score
640 (auto)
580
620 (lender)
620
Property types
Primary only
Primary only
Primary only
Primary, second, investment
Monthly Payment Comparison: $250,000 Home
Cost
USDA (0% Down)
FHA (3.5% Down)
Conventional (5% Down)
Down payment
$0
$8,750
$12,500
Loan amount
$250,000
$241,250
$237,500
Upfront fee (financed)
$2,500
$4,222
$0
Total loan
$252,500
$245,472
$237,500
Rate
6.5%
6.5%
6.75%
P&I
$1,596
$1,551
$1,540
Annual MI (monthly)
$74
$111
$99
Total monthly
$1,670
$1,662
$1,639
Cash needed at closing
$3,000-$6,000
$14,750-$18,750
$18,500-$22,500
USDA requires the least cash out of pocket despite similar monthly payments.
USDA Income Limits (2026)
Household Size
Most Areas
High-Cost Areas (Example)
1-4 people
$110,650
$130,000-$180,000+
5-8 people
$146,050
$170,000-$240,000+
What Counts as “Household Income”
Counts
Doesn’t Count
Borrower’s employment income
Income from minors (under 18)
Co-borrower’s income
Foster child income
Any adult household member’s income (18+)
Live-in aide income
Part-time and seasonal income
Certain disability payments
Overtime, bonuses, commissions
Social Security, pensions
Child support/alimony received
Rental income
Important: All adult household members’ income counts toward the limit—not just the people on the loan. A married couple where one spouse earns $70,000 and the other earns $45,000 would have $115,000 household income.
USDA Eligible Areas
What Qualifies
Eligible
Not Eligible
Towns under 35,000 population
Cities over 35,000 (generally)
Suburban areas outside metro centers
Dense urban areas
Rural communities
Some high-growth suburbs recently removed
Many areas within 30-60 min of a city
Core metro areas
Surprising Places That Are USDA-Eligible
Many buyers don’t realize suburban communities near these major cities qualify:
Near This City
Eligible Areas Found
Distance from City Center
Austin, TX
Surrounding suburbs and small towns
15-30 miles
Nashville, TN
Counties east and south of the city
20-40 miles
Raleigh, NC
Eastern and southern suburbs
15-25 miles
Denver, CO
Eastern plains communities
20-40 miles
Portland, OR
Southern and eastern communities
15-35 miles
San Antonio, TX
Northern and western suburbs
15-30 miles
Check the USDA eligibility map: eligibility.sc.egov.usda.gov/eligibility
USDA Guarantee Fee (Mortgage Insurance)
Upfront Guarantee Fee
Loan Amount
Upfront Fee (1.0%)
If Financed Into Loan
$150,000
$1,500
New loan: $151,500
$200,000
$2,000
New loan: $202,000
$250,000
$2,500
New loan: $252,500
$300,000
$3,000
New loan: $303,000
Annual Fee (Monthly Cost)
Loan Amount
Annual Fee (0.35%)
Monthly Cost
$150,000
$525
$44
$200,000
$700
$58
$250,000
$875
$73
$300,000
$1,050
$88
USDA’s annual fee (0.35%) is significantly lower than FHA’s (0.55%).
USDA Loan Process
Step
Action
Timeline
1
Check property eligibility on USDA map
Instant (online)
2
Check household income against limits
Instant (online)
3
Get pre-approved with a USDA-approved lender
1-3 days
4
Find an eligible home and make an offer
Varies
5
Standard appraisal (similar to FHA)
5-10 days
6
Lender underwriting
1-2 weeks
7
USDA approval (after lender approval)
1-3 weeks additional
8
Closing
45-60 days total
USDA loans take longer to close than conventional or FHA because they require a second approval from the USDA office after the lender approves.
USDA Property Requirements
Requirement
Details
Location
Must be in USDA-eligible area
Occupancy
Primary residence only (no investment or vacation)
Size
Must be modest for the area (no luxury homes)
Condition
Must be move-in ready (no major repairs)
Income-producing features
No working farms or income-producing land
Pool
Existing pool is fine; appraisal must note it
Acreage
Typically under 10 acres; larger parcels evaluated case-by-case
Manufactured homes
Allowed if on permanent foundation
Condos
Allowed in approved communities
New construction
Allowed
Who Should Get a USDA Loan
USDA Is Best For
Why
Buyers with no down payment savings
True 0% financing
Moderate-income buyers in suburban/rural areas
Income limits are generous ($110K+ for most areas)
