The USDA Guaranteed Loan is the most underused zero-down program in America. It is not just for farms. The "rural" designation covers most towns under 35,000 people — meaning suburbs of Raleigh, Austin, Nashville, Boise, and hundreds of other mid-size metros qualify. Check any address on the USDA eligibility map before ruling it out.
Worked example: $310,000 home, zero down, 1% upfront fee = $3,100 financed. Loan $313,100 at 6.75% on 30-year = $2,031/mo P&I. Add 0.35% annual fee ($91/mo), property tax at 0.9% ($233/mo), insurance ($117/mo). Total PITI = $2,472/mo.
Eligibility — two tests
USDA has two eligibility tests, both mandatory:
- Property test. The home must be in a USDA-eligible area. Enter the address on USDA's eligibility site — pink-shaded areas are eligible. This covers most of rural and small-town America, including many suburbs.
- Income test. Household income (all adults, whether on the loan or not) must be at or below 115% of the area median income. In many rural counties that ceiling is $90K-$110K for a family of four; in resort-adjacent areas it can hit $150K+.
USDA vs FHA vs VA for zero-down buyers
- USDA: zero down, 1% upfront + 0.35% annual fee. Income-limited. Property must be in eligible area. MIP stays for life of loan.
- VA: zero down, 2.15-3.3% funding fee, no PMI, no income limit, no geographic restriction. Eligible only for veterans/servicemembers.
- FHA: 3.5% down, 1.75% upfront + 0.55% annual. No income limit, no geographic restriction. Anyone can use.
For a buyer who qualifies for USDA and is under the income cap, USDA usually beats FHA on total cost. Lower annual fee (0.35% vs 0.55%) and lower upfront (1% vs 1.75%) make it a ~$100/mo saver on a $300K loan.
USDA closing cost tricks
USDA allows the seller to pay up to 6% in concessions. Combined with zero down, many USDA buyers close with $0 out of pocket — the seller covers closing costs and prepaids. This is the single reason USDA is so popular among first-time rural buyers.