A USDA home loan may let you buy a home with no down payment. But you still need to qualify, and “no down payment” does not always mean “no money needed at closing.”
This guide covers the USDA Guaranteed Loan, the program you apply for through a lender. USDA also has a separate Direct Loan program for eligible low- and very-low-income buyers. The rules below are for the Guaranteed Loan. USDA Guaranteed Loan program · USDA Direct Loan program
The three things to check first
- Is the home in an eligible area? The word rural can be misleading. Some homes near towns and suburbs qualify. The exact address matters, so check it on the USDA property eligibility map.
- Is your household income within the limit? USDA looks at income from the household, which can include adults who will live in the home but will not be on the loan. The limit depends on where the home is and how many people will live there. Certain allowed deductions may lower the income USDA uses for this test. USDA income eligibility information · USDA income guidance
Example: If you and your spouse apply for the loan and an employed adult relative will also live with you, that relative’s income may count toward the household income limit. It does not automatically mean their income can help you afford the monthly payment. Those are two different calculations.
- Can you afford the payment? The lender reviews your income, monthly debts, credit history, and the full proposed house payment. That payment includes more than principal and interest: property taxes, homeowners insurance, the USDA annual fee, and any applicable association dues also matter.
As a general starting point, USDA uses 29% of qualifying monthly income for housing and 41% for housing plus other monthly debts. Some borrowers may qualify above those figures under the program’s underwriting rules. USDA ratio guidance
Example: If your qualifying income is $5,000 a month, 29% is $1,450 for the full housing payment. At 41%, total monthly housing and other debt payments would be $2,050. These figures are a starting point, not a loan approval.
Does USDA require a certain credit score?
USDA does not set one minimum credit score for its Guaranteed Loan program. A lender or loan investor may set its own minimum, and the lender still needs to review how you have handled debt. A past credit problem does not always end the conversation, but it may call for more documentation or limit your options. USDA program requirements · USDA lender training
If you are self-employed, tell your loan officer early. Self-employment income often takes more work to document than wages from a job. The income used to check the household limit can also differ from the income the lender can use to show you can repay the loan. USDA income guidance
What will I pay if there is no down payment?
Plan for an appraisal, closing costs, prepaid taxes and insurance, and USDA program fees. Your loan officer can give you an estimate for the specific home. Savings, eligible gift funds, or a negotiated seller credit may help cover costs, subject to program rules.
Some eligible costs may be financed when the appraisal and loan terms allow it. For example, if a home’s value supports a loan amount above its purchase price, there may be room to include eligible costs. Do not count on that money until the appraisal and lender review are complete.
Having savings does not automatically disqualify you. USDA may, however, look at certain assets and income they produce when checking eligibility. USDA program overview · USDA income and asset training
What kind of home can I buy?
The home must be in an eligible area and be your primary residence—the place you plan to live. You cannot use this program to buy a vacation home or investment property. USDA Guaranteed Loans may also support eligible building, repair, or improvement projects, but those transactions have additional requirements. Ask about a specific modular or manufactured home before making an offer; its construction, site, and financing details must meet the applicable rules. USDA Guaranteed Loan program
What happens after I apply?
- Check the area and income limit. Start with the home’s address, or look at eligible areas before shopping.
- Get pre-approved. A lender reviews your income, debts, credit, and likely payment so you know what price range to consider.
- Make an offer. Your pre-approval letter can go with the offer.
- Complete the property review. The lender orders an appraisal and checks that the home and loan meet program requirements.
- Review your final costs and close. Before signing, look at the final payment and the amount you must bring to closing.
USDA Guaranteed Loans have a 30-year fixed interest rate. The rate is set by the lender, so your loan officer should explain both the rate and the full monthly payment. If you already have a USDA loan, ask about current refinance options; the available choice depends on your loan and circumstances. USDA Guaranteed Loan program
USDA or FHA: which should I ask about?
If the home is in a USDA-eligible area and your household income is within the limit, USDA’s no-down-payment option is worth checking. If the address or household income does not qualify, FHA may be another option. Compare the cash needed to close, full monthly payment, and total loan costs before choosing.
Ready to check a home? Spurr Mortgage can help you review the address, household income, credit, and estimated payment before you make an offer. Call 405-348-9919 to discuss your options. All loans are subject to program requirements, lender review, and credit approval.