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.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 hist...