# What Is a USDA Loan?

By Christie Latham (@christielatham) · Published 2026-10-20

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A USDA loan is a government-backed mortgage that lets eligible buyers finance **100% of a home** — no down payment at all — in qualifying rural and suburban areas. Backed by the U.S. Department of Agriculture, the program was created in 1949 to support affordable housing outside major cities, and it remains **one of the most overlooked paths** to homeownership for homebuyers who think they need a large down payment.

The catch most people assume — that "rural" means farmland and only farmers qualify — is largely a myth. Roughly **74% of U.S. land area** is USDA-eligible, and many suburban communities just outside metro centers qualify. In fast-growing regions of North Carolina, where I work as a loan officer, USDA-eligible zones sit close enough to jobs and schools that buyers can get zero-down financing without a long commute.

Here's how the loan works.

#### Key Takeaways

-   USDA loans offer 100% financing — no down payment — for buyers in eligible rural and suburban areas.
-   You don't have to be a farmer or first-time buyer to qualify; any buyer of a primary residence in an eligible area can apply.
-   Eligibility comes down to two filters: the home's location and your household income (up to 115% of area median income).
-   The home must be your primary residence.

## What Is a USDA Loan?

A USDA loan is a **100% financing mortgage** — you borrow the full purchase price with zero down payment. ([USDALoans.com](https://www.usdaloans.com/program/eligibility)).

The key to understanding USDA loans is what "rural" actually means here. About 74% of U.S. land area is eligible — far more than most buyers assume.

## Who Qualifies for a USDA Loan?

Qualifying for a USDA loan comes down to:  
**Location. The home's location and your household income**. If the property sits in a USDA-eligible area and your total household income stays at or below the limit for that county, you're most of the way there.  
**Income.** USDA loans cap eligibility at roughly **115% of the area median income**, adjusted for household size. Importantly, the USDA counts the income of everyone in the household, not just the borrowers on the loan.  
**Credit and debt.** Lenders typically look for a credit score of at least **620**, and your total monthly debts should stay near **41% of gross income.**

USDA loans are **30-year fixed-rate mortgages only**. You can even pair the loan with down payment assistance programs to cover closing costs, and you may use gift funds from family or seller credits as well. Let's see if you qualify for a USDA loan!