USDA Loans
Zero Down Payment Financing for Rural Properties
USDA loans through Howell Mortgage Group provide zero-down-payment financing for eligible homebuyers purchasing in USDA-designated rural and suburban areas. Backed by the United States Department of Agriculture, these loans feature reduced mortgage insurance costs and below-market interest rates for borrowers with household incomes at or below 115% of the area median.
What Is a USDA Loan?
A USDA loan is a zero-down-payment mortgage backed by the United States Department of Agriculture through its Rural Housing Service. The program was created to promote homeownership in rural and suburban communities that meet specific population thresholds.
Two types of USDA loans exist. Guaranteed loans are issued by approved private lenders like Howell Mortgage Group and backed by the USDA. Direct loans are funded directly by the USDA for very-low-income applicants. Most borrowers use the guaranteed loan program because it offers more flexible income limits and is available through standard mortgage lenders.
Despite the name, USDA-eligible areas are not limited to farmland. Many suburban communities, small towns, and exurban neighborhoods qualify. The USDA eligibility map is updated periodically, and some areas that seem suburban or even semi-urban are included in the program.
Requirements and Qualifications
Income Limits
Your household income must not exceed 115% of the area median income for your county. All household members’ income is counted, not just the borrower’s.
Primary Residence
The property must serve as your primary home. Investment properties, vacation homes, and income-producing farms are not eligible for USDA financing.
Property Location
The home must be in a USDA-designated rural area. Use the USDA eligibility map at rd.usda.gov to verify any address before making an offer.
U.S. Citizenship
Applicants must be U.S. citizens, qualified aliens, or non-citizen nationals with valid government-issued identification.
Credit Score
Most USDA lenders require a minimum score of 640 for automated underwriting approval. Borrowers below 640 may still qualify through manual underwriting.
Property Standards
The home must have adequate utilities, road access, and meet USDA minimum property requirements. Most single-family homes under 2,000 square feet in eligible zones qualify.
How USDA Loans Work
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Check Eligibility
Verify that the property address falls within a USDA-eligible area and that your household income meets the 115% limit for your county. -
Get Pre-Approved
Submit income documentation, identification, and credit authorization to Howell Mortgage Group for a USDA pre-approval assessment. -
Find an Eligible Property
Work with your agent to identify homes in USDA-designated zones that meet the program’s property condition requirements. -
Submit Your Application
Complete the loan application with full documentation including tax returns, pay stubs, bank statements, and proof of citizenship. -
USDA Appraisal and Review
A certified appraiser evaluates the property for value and condition. The file is then submitted to USDA for their underwriting review. -
Closing
After USDA approval, finalize the transaction at the closing table with zero down payment and begin enjoying your new home.
Benefits of USDA Loans
Zero Down Payment
USDA loans offer 100% financing, meaning no down payment is required. This is one of only two major loan programs (along with VA) that allow zero-down purchases.
Flexible Credit Requirements
Manual underwriting is available for borrowers with limited credit history or scores below 640, considering alternative credit sources like rent and utility payments.
Lower Mortgage Insurance
The USDA guarantee fee (1% upfront and 0.35% annually) is significantly less than FHA mortgage insurance premiums, saving hundreds per year.
Closing Cost Financing
Closing costs can be financed into the loan if the appraised value exceeds the purchase price, or the seller can contribute up to 6%.
Below-Market Rates
USDA loan interest rates are often 0.25% to 0.50% lower than conventional rates because the government guarantee reduces lender risk.
Who Should Consider a USDA Loan?
USDA loans are purpose-built for moderate-income families who want to buy a home in a rural or suburban community without saving for a large down payment. If your household income falls within the county limits and you want to live outside of major metropolitan centers, this program offers unmatched affordability.
First-time and repeat homebuyers both qualify. There is no first-time buyer requirement, and you can use the program even if you have owned a home before, as long as you do not currently own adequate housing.
Borrowers with limited savings benefit the most because the zero-down structure means your only upfront cost is closing fees, which can often be rolled into the loan or covered by seller contributions. Combined with below-market interest rates, USDA loans produce some of the lowest monthly payments available in today’s mortgage market.
How Does This Compare?
Feature | USDA | FHA | Conventional |
|---|---|---|---|
Credit Score | 640 (most lenders) | 580 | 620 |
Mortgage Insurance | 1% upfront + 0.35% annual | 1.75% + 0.55% annual | PMI (removable) |
Location Restrictions | Rural/suburban | None | None |
Income Limits | 115% of area median | None | None |
Down Payment | 0% | 3.5% | 3%-20% |