A USDA loan is a mortgage backed by the US Department of Agriculture that lets eligible buyers purchase a home with zero down payment. Despite the farm-sounding name, it's not just for farms — plenty of suburbs and small towns qualify. Eligibility has two sides: the property must sit in a USDA-designated rural area, and your household income must fall under the local limit.
Instead of PMI, USDA loans carry an upfront guarantee fee (which can be rolled into the loan) and a modest annual fee paid monthly — often cheaper than the private mortgage insurance on a low-down conventional loan.
A concrete mechanic: because you finance the full purchase price, you start with essentially no equity, and your early payments are almost all interest. If your area or income doesn't qualify, an FHA loan with its 3.5% minimum down is the usual fallback. Run the zero-down scenario in the mortgage calculator to see what the payment looks like.