The United States Department of Agriculture offers a no-down payment program to promote homeownership for low- and middle-income people in rural areas of the United States.
The program also allows applicants to borrow their closing costs. The pros: You can buy a house with no money down and no money needed to pay for closing costs. But the con is that the home must be in a designated area that the USDA considers rural.
Rural, though, doesn't mean boondocks — about 97% of the land in the United States qualifies, including many suburban areas, according to the USDA's eligibility map.
Here's how to qualify for the loan program.
Confirm eligibility
- Your income is equal to or below 115% of the median income of the county where the house is located (check USDA tables)
- Home is in a rural or suburban area (check USDA for maps)
- Must be U.S. citizen or qualified non-citizen
- Property must be primary residence
- Credit rating is 620 to 640 (though USDA will consider lower scores)
Choose a loan type
- Guaranteed loan: Mortgage is from a lender and is backed by the USDA
- Direct: USDA issues loans directly for borrowers with very low incomes
Gather financial documents
- Pay stubs
- Tax returns
- Bank statements
- Proof of income
Seek prequalification and preapproval of loan
- Contact USDA-approved lender if applying for guaranteed loan
- Get pre-qualified to determine how much you can afford
- Get preapproval to strengthen offers on homes
Search for home
- Must meet USDA's standards for safety, sanitary conditions and sound construction
- Must not produce income
Application and closing
- Submit application to lender, if guaranteed loan
- Lender underwrites and sends to USDA for approval
- Pay USDA fee of 1% of loan amount
- Agree to pay annual mortgage insurance of 0.35%
- Close on home in 30- to 60 days