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No Down Payment? No Problem! – USDA Loans Explained by A Pro
One of the things that holds people back from purchasing their first home is the daunting down payment they think they’ll have to fork over. There are a few ways around that hurdle, and one of the most popular is the loan program offered by the United States Department of Agriculture (USDA)!
The purpose of a USDA loan is to assist moderate-to-low-income families in rural communities. These loans can cover the full amount of the home’s appraised value, which means no down payment is required!
How USDA Loans Help Rural Buyers – Tips from a Loan Officer
Annie Griffin, a loan officer in our Springfield, MO, branch, sat down with us to chat about why a USDA loan is a great fit for borrowers in rural areas, as well as some advice for those considering this loan type for themselves.
Can you tell us a little about a USDA loan success story? Who was the borrower, and what were their goals?
I just helped my clients close on their first home with a USDA loan. They’re in their early 20s and have been considering homeownership for the last year. They reached out to me in February, saying their rental lease would be ending in March, and wanted to see if they could qualify for a home loan.
They were very nervous, saying they didn’t think they’d qualify, especially since he’d been at his sales job for barely one year.
What made USDA the right fit for these particular borrowers?
USDA was the perfect option for them because they were within the income limit, were already planning on moving outside of Springfield, and didn’t have enough money saved to cover a down payment or closing costs. When we ran the numbers together, they were comfortable with the monthly payment, and we talked through how their realtor could help get seller concessions to help them with their closing costs.
It all came together for them, and they were ecstatic on closing day!
What are some of the most significant advantages of using a USDA loan?
The most significant advantage of a USDA loan is that it is an actual zero-down loan program. There is no down payment required, making it very appealing to people who want to own a home but are struggling to save money.
USDA also typically has lower interest rates, being a government loan, and you don’t need perfect credit! USDA is more lenient when it comes to credit scores.
How did the borrowers feel about the zero down payment requirement? Did it make homeownership more accessible?
They wouldn’t have been able to purchase a home right now without the zero down payment requirement! Their realtor worked hard and negotiated seller concessions to help them with their closing costs, and they brought $0.80 to closing.
Yes, you read that right. Not having to bring money to closing sets them up for success as homeowners. Now they’re able to build up their savings in case of an emergency.
How did the borrowers react when they officially became homeowners?
My clients were so excited on closing day! It’s genuinely the most fun part of the process and is often the first time I get to meet my clients face-to-face. They told me all about their plans for the home, and how they couldn’t wait to move in their furniture and order pizza to their new address!
It was so sweet to hear them talk about their future, and they were so grateful for our help with the process.
What advice would you give other home buyers considering a USDA loan?
The most crucial things to know about a USDA loan are that there’s no down payment, you’re limited to rural areas (check out the eligibility map here), there are income limitations, it’s based on household income, and you don’t need perfect credit.
While we love USDA loans, they also require a lot of documentation. Especially if it needs to be manually underwritten. I always prepare my clients that we’ll be thoroughly reviewing taxes, bank statements, and income. It can be intimidating as a buyer to provide a bunch of documentation and explain deposits in their bank accounts.
That’s why it’s so important to prep them in the beginning, so they know what to expect during the process.
Are there any other words of wisdom you’d like to impart to first-time homebuyers in general?
If you are looking at buying your first home, remember this… your first home won’t be your dream home. But the first step to buying your dream home is to buy your first home.
My clients plan to live in this home for a few years, start a family, and then look at upsizing when the time comes. They wanted to get into a home so they could start building equity for themselves. Then, when they go to sell it, they’ll be able to use all their equity toward purchasing a bigger home!
That’s the power of homeownership. Learning how to make your mortgage and your assets work for you!
For more information about a USDA loan and how it could help you attain the dream of homeownership, reach out to a Gershman Mortgage loan officer today!
About Gershman Mortgage
About Gershman: Communities, families, and homes are at the heart of what we do at Gershman Mortgage. Our founding principles are based on the core values of honesty, integrity, the entrepreneurial spirit, and putting our customers first. We are passionate and committed to customer service and strive to ensure that we exceed the expectations of our customers. We are a customer-centric company devoted to creating and maintaining long-lasting relationships.
NMLS #138063 16253 Swingley Ridge Road, Suite 200, Chesterfield, MO 63017 (800) 457-2357 Equal Housing Lender. Serving Borrowers in: Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Wisconsin
Written by Alli Wideman 04/28/2025 for Gershman Mortgage
