A USDA Loan Can Open Doors for First-Time Homebuyers

By Alvaro Moreira
7 min read

A USDA Loan Can Open Doors for First-Time Homebuyers

Key Takeaways:

  1. A USDA loan allows borrowers with low to moderate income to purchase homes in rural areas. 
  2. If your income and desired property qualify for a USDA loan, you’ll receive 100% financing. This means you can borrow the entire amount with no down payment required. 
  3. This loan can open the door to home ownership to first-time homebuyers, allowing you to buy a house for an affordable rate even if you don’t have anything saved for a down payment. 
  4. A property does not necessarily have to be in the middle of nowhere to qualify; some suburban and growing areas just outside metro areas are still eligible. 
  5. The booming Atlanta area makes a great case study in how smart house hunters can find USDA-qualifying homes that are relatively close to big cities. While most of metro Atlanta is ineligible for USDA loans, many suburban and rural areas just outside the immediate metro area are still eligible.

Home ownership has long been part of the American dream, but in recent years, soaring house prices and high interest rates have made that dream feel out of reach for many people. Not only are houses more expensive than ever before; now thanks to inflation, few of us have extra income to save for a down payment. But there is a loan option that provides 100% financing, allowing qualified buyers to purchase homes without a down payment.

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A USDA loan allows borrowers with low to moderate income to purchase homes in rural areas. This loan can open the door to home ownership to first-time homebuyers, allowing you to buy a house for an affordable rate even if you don’t have anything saved for a down payment. Whether you are a first time homebuyer or an experienced buyer looking for a different opportunity, a USDA loan is worth investigating. It might be the key that unlocks the door to home ownership.

How a USDA Loan Can Help First-Time Homebuyers

USDA loans are government-backed loans that enable qualified buyers to purchase homes in less-developed areas. If your income and desired property qualify for a USDA loan, you’ll receive 100% financing. This means you can borrow the entire amount with no down payment required. That’s an astounding opportunity, especially if you’re a first-time buyer who doesn’t have a down payment saved. Most conventional loans require borrowers to save a percentage of the cost of their home as a down payment: For FHA loans, you are required to put down 3.5% of the cost of the home; other traditional loans typically require between three and five percent. That adds up to thousands of dollars.   

Let’s take a closer look at the USDA loan qualifications, which depend on two factors: your income and the location of the property you want to purchase.

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How do I know if my income qualifies?

USDA loans are intended to make home ownership possible for buyers who have low to moderate income, and who might not otherwise qualify for a conventional loan. Here are a few qualifications you’ll need to meet: 

  • Your income will need to fall beneath a certain limit, and the limits vary by state and county. 
  • You need to have a decent credit score. Typically a score of 620 or higher will qualify you, but there are exceptions.
  • Your debt-to-income ratio should fall within an acceptable range, usually 41 to 45%, but again, there can be exceptions. 
  • Eligible borrowers must be U.S. citizens, U.S. citizen nationals, or qualified aliens.

To find out the income limit for the state in which you’d like to purchase, visit the USDA Income and Property Eligibility Site, enter your information, and use the calculator to help you determine your eligibility.

How do I know if a property qualifies?

The intent behind the USDA loan is two-fold: to open up home ownership to borrowers who might not otherwise qualify, and to encourage development of more rural areas. But keep in mind that rural doesn’t always mean remote. A property does not necessarily have to be in the middle of nowhere to qualify; some suburban and growing areas just outside metro areas are still eligible. The government updates the maps determining eligibility every 5 to 7 years, so you may find that some developing areas that are experiencing growth may still fall within the accepted boundaries. To determine whether or not an area is eligible, visit the USDA map. Keep in mind that these maps do change every few years, so time is of the essence: If your desired area qualifies for a USDA loan today, don’t waste time—the next time the maps are updated, the boundary lines may change.

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Neighborhood Spotlight: USDA-Qualifying Areas Outside Metro Atlanta

The booming Atlanta area makes a great case study in how smart house hunters can find USDA-qualifying homes that are relatively close to big cities. While most of metro Atlanta is ineligible for USDA loans, many suburban and rural areas just outside the immediate metro area are still eligible. If you’re looking for less traffic and noise, but you want to live within easy driving distance of Atlanta’s big-city excitement, you have many options thanks to the USDA loan. Here are a few examples: 

Cartersville, known as “the gateway to Northwest Georgia,” is a charming town just north of Atlanta along I-75. Cartersville boasts a home-grown collection of boutiques and breweries, a nostalgic and active downtown area, multiple museums, and the gorgeous Red Top Mountain State Park. If you want to enjoy a smaller-town lifestyle with easy access to big-city conveniences and entertainment, Cartersville could be a great option. If you use the USDA loan to take advantage of Cartersville’s affordable housing prices, you could embrace a life you love with a mortgage you can afford.

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Hampton, Georgia has preserved its small-town feel while also welcoming healthy growth. When walking the streets of Hampton, you’ll find antebellum homes basking in the shade of oak trees, and beautiful history preserved and repurposed: a gorgeous train depot now serves as a community building, and the old city jail is now a bustling brewery. Hampton is proud of its designation as a “Tree City” and “Bird Sanctuary.” Local kids enjoy access to a splash pad, skate park, ice skating rink, and other amenities that promote a healthy lifestyle. 

Just 35 miles outside Atlanta, the city of Locust Grove offers residents the close community connections of small-town life with convenient access to urban benefits. Locust Grove is committed to preserving its natural resources while also embracing modernity and making improvements. The city has invested in revitalizing Historic Downtown Locust Grove, which now boasts a variety of restaurants, boutiques, and stores providing local goods and services.  

Towns like these are just a few of the many wonderful options for first-time buyers in Georgia who are looking for more space and affordability without the headache and expense of competing in the fast-paced urban market. To explore more USDA-eligible towns like these, visit the USDA map and explore Atlanta’s growing south side. 

Why Now Is the Time to Consider a USDA Loan

USDA loans remain one of the best ways to get into homeownership with no down payment.

Many first-time buyers aren’t aware of this program, making it an untapped resource. If you’re in the market for a home, these loans are worth considering now, for several key reasons: 

Property values increase over time.

When you purchase property in a USDA-eligible area, and that property is within a reasonable driving distance of a larger metro area, chances are, your new hometown will experience growth over time. As homebuyers leave big cities in search of more land and a slower pace of life, they bring growth and community along with them. New restaurants, boutiques, amenities, and community traditions build over time. All that growth adds value to your investment.

Rural designations can change unexpectedly.

Keep in mind that because growth and development may continue, a property that currently qualifies as rural may not qualify for long. When the USDA maps are updated, the property may be redesignated. It pays to act now, while you know you can get a great price and qualify for a 100% USDA loan. 

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How to Apply for a USDA Loan

Wondering if you qualify? These steps will help you get started:

  • Check your credit to ensure it’s in good shape.
  • Work on your debt-to-income ratio, which will improve your chances of qualifying for a loan.
  • Make sure your income level qualifies, keeping in mind that income limits vary by area. Visit the USDA Income and Property Eligibility Site, where a calculator can help you determine your eligibility.
  • Visit our mortgage calculator to find out what your monthly payments might look like. 
  • Explore eligible areas on the USDA map. It shows up-to-date information to help you identify towns to visit and properties to explore.

Are you ready to find an affordable way to buy your first home? We’d love to help you benefit from 100% financing and no down payment, if you qualify. Contact the Moreira Team and start pursuing your dream home today.