USDA Loans: Zero Down in Rural Areas

USDA loans offer 100% financing—no down payment—for homes in eligible rural and suburban areas. If you're buying in the Central Valley, you might qualify.

What Is a USDA Loan?

The USDA Rural Development Guaranteed Housing Loan Program helps moderate-income buyers purchase homes in rural areas. Despite the name, many suburban areas qualify.

Key Benefits

No Down Payment

True 100% financing:

• No down payment required
• Can finance closing costs in some cases
• Significant advantage for cash-constrained buyers

Lower Mortgage Insurance

Compared to FHA loans:

• Upfront guarantee fee: 1% (vs. FHA's 1.75%)
• Annual fee: 0.35% (vs. FHA's 0.55%)
• Lower ongoing costs

Competitive Rates

Often comparable to or better than conventional rates because the government guarantee reduces lender risk.

No Loan Limits

Unlike FHA and conventional conforming limits, USDA doesn't set maximum loan amounts—but your qualification is limited by your income and debt ratios.

Eligibility Requirements

Property Location

The property must be in a USDA-eligible area:

• Rural areas
• Many suburban areas qualify
• Check specific addresses on USDA's eligibility map

Much of Kings County, Tulare County, and rural Fresno County is eligible.

Income Limits

Household income can't exceed limits for your area:

• Limits vary by county and household size
• Based on total household income (everyone in the home)
• Typically around 115% of area median income

For current limits, check USDA's website or ask a lender.

Primary Residence

Must be your primary residence:

• No investment properties
• No vacation homes
• Must move in within 60 days

Credit and Debt

General guidelines:

• Minimum 640 credit score preferred
• Debt-to-income ratios typically max 41%
• Stable employment history
• No recent bankruptcies or foreclosures

Property Requirements

The home must meet USDA standards:

• Must be modest for the area (no luxury homes)
• Must be move-in ready (no major repairs needed)
• Must have adequate utilities
• No income-producing features (farms, business facilities)

How USDA Compares

Feature	USDA	FHA	VA	Conventional
Down payment	0%	3.5%	0%	3-20%
Mortgage insurance	0.35% annual	0.55% annual	None (funding fee instead)	PMI until 20% equity
Location restriction	Yes	No	No	No
Income limits	Yes	No	No	No
Credit score	640+	580+	Flexible	620+

The Application Process

Step 1: Check Eligibility

Before falling in love with a home:

1. Check if the property location is USDA-eligible
2. Verify your income is within limits
3. Review credit and debt situation

Step 2: Find a USDA-Approved Lender

Not all lenders do USDA loans. Find one experienced with the program—they know the quirks and requirements.

Step 3: Get Pre-Approved

Pre-approval tells you:

• You meet income requirements
• Your credit qualifies
• Your maximum purchase price

Step 4: Find an Eligible Home

Shop within:

• USDA-eligible areas
• Your budget
• Properties meeting USDA condition standards

Step 5: Close

USDA loans may take slightly longer due to:

• USDA review and approval
• Additional documentation
• Property eligibility confirmation

Is USDA Right for You?

Consider USDA If:

• You're buying in a rural or suburban area
• Your income is moderate (within limits)
• You have limited down payment savings
• You want lower mortgage insurance than FHA

Look Elsewhere If:

• You want to buy in a city center
• Your income exceeds limits
• You're buying a fixer-upper
• You're buying an investment property

Central Valley Opportunity

The Central Valley's rural character means many areas qualify for USDA financing. It's worth checking eligibility—you might be surprised what areas are included.

---

Wondering if USDA works for your situation? Contact Greg Franklin or call (559) 816-7780 to discuss options.