A USDA loan is a program that allows zero-down payment mortgages for rural homebuyers who are unable to afford a traditional mortgage. Currently, fewer than 5% of people in the U.S. have USDA home loans in America, but that number is expected to grow in the near future.

At Allied Mortgage, we’re the home loan experts who provide each customer with flexible loan options depending on their stage of life. With over 25 years of industry success, we pride ourselves in committing to our pillars of integrity, reputation and commitment. When you work with us, you’ll feel like family throughout the entire process instead of just another client — just check out our ratings. Here’s what you need to to know about USDA mortgages:

Understand eligible locations

As part of the USDA, you’ll only qualify for a mortgage to purchase a home in certain protected zip codes. Large metro areas are generally excluded from USDA mortgages but pockets of homes do exist in some suburbs. Additionally, you’ll only qualify for homes that are 2,000 square feet or fewer with a market value below the loan limit. How much you’ll qualify for depends on the cost of living in your chosen state.

Before applying for a USDA loan, try browsing available areas by state to get a bigger picture of where you’ll be able to live and where you won’t.

No down payment required

The average down payment for first-time home buyers in America is about 7%, but you’ll be able to secure a home with a 0% down payment and 100% financing. While conventional loans require PMI insurance if you have less than 20% equity in your home, home purchases with USDA don’t require any sort of PMI insurance. This equals huge savings because the average cost of PMI insurance is $30-$70 per month for every $100,00 borrowed.

Fixed interest rates

At USDA, loans are at a 30-year fixed-rate mortgage, allowing you to lock in a spectacular long-term rate. However, keep in mind that some fees are required upfront including a guaranteed fee of 1% of the loan amount and an annual 0.35% of the loan amount. Keep an eye on these fees because they tend to fluctuate annually.

Loser credit standards

Applicants are encouraged to have a credit score of 640 or above for streamlined processing. You can still qualify with a credit score below that but are required to submit underwriting. If you don’t have a credit score or limited credit history, you may be eligible to present rental and utility payment histories.