Millions of suburban homes qualify for a $0-down payment mortgage

Saving 10% or 20% of a home’s price for a down payment can take years, especially when the average house costs nearly $400,000. In this economy, when rent, utilities and child care are getting more expensive by the minute, not having to save up $80,000 is a blessing. That’s why some buyers looking beyond major city centers may qualify for a federal mortgage program that could be the answer to their prayers and requires no down payment at all.

The U.S. Department of Agriculture’s Section 502 Guaranteed Loan Program allows qualified borrowers to finance up to 100% of an eligible home purchase. The mortgages are made by USDA-approved private lenders, while the federal government guarantees part of the loan. The USDA says the program is designed to help low- and moderate-income households buy homes that will serve as their primary residences in eligible rural areas.

97% of the U.S. landmass is eligible for the Section 502 loan program

The word “rural” is where many buyers stop paying attention, and that can be a mistake. USDA does not limit the program to farms, isolated towns or places far from a metro area. Its program says eligible areas generally include communities with populations of up to 20,000, while some communities with populations as high as 35,000 may qualify under special circumstances.

As a result, the eligible map can extend into small towns, exurbs and the outer edges of metropolitan areas. A neighborhood can look and function like a suburb while still falling inside USDA’s mortgage footprint. A buyer who relies on a real estate listing’s description of a neighborhood as “suburban” could therefore miss a financing option that USDA considers available.

The USDA’s Economic Research Service reported that 46.2 million people lived in nonmetropolitan counties in July 2024. That figure is not the same as USDA mortgage eligibility, but it shows, however, that rural and near-rural America includes tens of millions of people and is much larger than the image of a remote farming community suggests.

There is also historical evidence that USDA-backed lending has reached places that many people would call suburban. A Government Accountability Office analysis of fiscal 2009 lending found that more than half of Rural Housing Service guaranteed loans were made in ZIP codes that USDA’s Economic Research Service classified as urban or suburban. The same report also noted that ZIP codes can contain both eligible and ineligible territory.

The Neighbors Bank USDA property eligibility map can tell you if an address of a home you’re looking at buying qualifies for a 502 loan. 

Other requirements for USDA loans

Location is only one of the eligibility requirements for a 502 loan. To be accepted into the program, your household income generally cannot exceed 115% of the median household income for the area where the home is located. The home you are looking to buy must also be your primary residence after the purchase. Finally and crucially, you still have to pass a lender’s underwriting process.

The USDA does not set a universal minimum credit score for the program. Instead, it says applicants must demonstrate the willingness and ability to manage and repay their mortgage debt. Lenders are responsible for making the underwriting decision, so a borrower can meet the broad USDA rules and still fail to qualify for a particular loan based on income stability, debt obligations, credit history or other underwriting factors.

Ask yourself: Does the math work out?

Zero down payment does not mean zero cost. For 2026, USDA’s guaranteed program charges an upfront guarantee fee equal to 1% of the loan amount and an annual fee of 0.35% based on the average scheduled unpaid principal balance. USDA says the upfront fee can be financed, and reasonable and customary closing costs can also be paid with loan funds when program rules are met.

Financing those expenses can reduce the amount of cash needed at closing, but it also increases the amount you borrow. A buyer who rolls a $3,000 fee into a mortgage, for example, is not avoiding that $3,000 cost. The buyer is borrowing it and paying interest on it over time.

The same math works for the down payment. A zero-down payment mortgage can allow a household to buy sooner, but borrowing close to the full purchase price means the homeowner begins with not a lot of (or no) equity. If home prices fall or the owner needs to sell soon after buying, that thin equity cushion can matter.

Homeownership also creates expenses that a down payment does not cover. Property taxes, homeowners insurance, utilities, maintenance and unexpected repairs can all raise the monthly or annual cost of owning a home. That means a buyer who qualifies for a zero-down payment mortgage still needs to decide whether the total housing cost fits comfortably within their budget.

Step-by-step guide to getting a $0-down payment mortgage

The practical first step is simple. Buyers searching in small towns, exurbs or outer suburban communities can enter a property address into USDA’s online Income and Property Eligibility Site. The USDA describes the online result as a preliminary screen, and you will separately have to review your household income to see if you’re eligible. Final property eligibility is determined after the USDA receives a complete application.

If the address appears eligible, the next step is to contact a USDA-approved lender and ask for a loan comparison based on the buyer’s actual finances. Buyers should also ask for the estimated cash needed at closing and the projected monthly payment, including principal, interest, taxes, insurance and the USDA annual fee.

The biggest lesson is not that every suburban buyer can get a zero-down payment USDA loan, but there is more opportunity than the program’s “rural” label implies. For buyers who are struggling to put together a traditional down payment, checking a prospective address will take just a few minutes and may uncover a 100% financing option they did not know was available.

Why Trust the New York Post

This article was written by Brooklyn-based financial journalist and Commerce Editor for the New York Post Will Kenton. Specializing in investing, personal finance and retirement planning, Will’s expertise is rooted in behavioral economics — a field he explored as associate editor of the New School Economics Review. Will aims to help readers navigate the “predictable irrationality” that influences financial decisions, providing practical real-world solutions to student loan debt, investments, mortgages and more. Before joining The Post in 2026, Will covered the intersection of money, economics and culture for Investopedia, AP News, Business Insider and TIME Stamped.