How to Buy a House With No Money Down: USDA Loans and the Catches

Can you really buy a house with no money down?

Yes, in some cases. The most common route is a loan guaranteed by the U.S. Department of Agriculture (USDA), which allows 100% financing for eligible buyers in eligible areas. The VA loan, for veterans and service members, is another zero-down option. Neither is a loophole. Both come with eligibility rules, fees and trade-offs that matter more than the headline.

That is the core of a recent video by real estate investor Wayne Turner, who walks through a new-construction house in Covington, Louisiana, and argues that a down payment is "not as important as you thought." The home he tours has three bedrooms, two baths, roughly 1,400 square feet and a $245,000 price, and the builder is offering to pay the buyer's closing costs. His point is that many renters could qualify for a USDA loan and never save a down payment.

Turner's broad message holds up. Several of his specifics need checking, and this article separates the two.

What Wayne Turner says about the USDA route

Turner makes these claims, which we present as his and not as verified figures:

• A USDA loan finances 100% of the purchase price.
• Lenders look for a credit score of roughly 620, though he says some will go as low as 580.
• The income cap is $122,800 for a household of four or fewer and $162,100 for five or more, "in most parts of the country."
• Lenders take gross monthly income, subtract minimum debt payments, and approve a payment of about 32% of the remainder.
• USDA mortgage insurance is far cheaper than conventional private mortgage insurance, which he puts at about $150 a month on a house like this one.
• You do not have to be a first-time buyer. You just cannot currently own a home.
• A double-wide manufactured home can qualify if it is permanently anchored to a foundation.
• Closing costs still apply even with a 100% loan.

He also argues that eligible areas are often suburbs that were once rural, giving the Covington area, with its big-box retailers and restaurants, as an example. He says every house in St. Tammany Parish qualifies by location, though a given buyer's income may still disqualify them.

Fact-checking the key figures

Here is how those claims line up with what buyers should verify. We could not confirm every number from the transcript alone, so treat the right-hand column as a checklist, not a final answer.

How the fee math could play out

Turner's formula multiplies the price by 0.008 and divides by 12. On a $245,000 house, that gives about $163 a month, close to his "$150" figure. USDA's published fee structure in recent years has been lower: an upfront fee of about 1% (which can usually be rolled into the loan) and an annual fee of about 0.35%. At 0.35%, the annual fee on $245,000 would be roughly $71 a month. Those rates can change, so confirm them with USDA or a lender. The direction of Turner's point, that USDA insurance usually costs less than conventional PMI, tends to hold, though the exact amount depends on current rules and your credit profile.

Who actually qualifies

USDA's Single Family Housing Guaranteed Loan program is built for low-to-moderate-income buyers in areas the agency defines as rural. Three conditions do most of the screening.

Income. The cap applies to total household income, not only the borrower's. If another adult lives in the home, their income can count toward the limit. Turner says self-employed buyers are assessed on adjusted gross income, which is consistent with how lenders generally treat tax returns, but lenders typically average two years of self-employment income.

Location. The property must be in an eligible area, and USDA offers an online map. Turner says many eligible areas sit 35 to 40 miles outside major metros. That is a rough description. Eligibility is by address, so a house next door to an eligible one can be excluded.

Occupancy and ownership. The home must be your primary residence. Turner is right that you need not be a first-time buyer. USDA's rule is about not owning adequate housing, so someone coming out of a divorce or a sale may still qualify, but a lender will want specifics.

Credit matters too. Turner stresses that today's lending is not a repeat of the mid-2000s, when loans were available with little documentation. Modern lenders verify income, check credit and assess job stability. That is a fair contrast with the pre-2008 era.

Why builder incentives matter

Closing costs often run a few percent of the purchase price, which is why a builder paying them can be as valuable as a lower rate. Rules limit how much a seller or builder can contribute. As general guidance, caps vary by loan type, commonly around 6% of the price for FHA and USDA, 4% for VA, and a range for conventional loans that depends on the down payment. Confirm the figure for your loan.

Builders often offer incentives because they would rather cut financing costs than reduce the list price, which can affect neighborhood comparable sales. If you are weighing a seller or builder credit against a price cut, our explainer on seller-paid mortgage rate buydowns versus price cuts walks through the math. For context on how much leverage buyers currently have in negotiations, see what the data says about buyer leverage.

Other low-down options if USDA does not fit

USDA is not the only way in. A few alternatives, described as general guidance:

• VA loans. Eligible veterans and service members can often buy with no down payment and no monthly mortgage insurance, though a funding fee usually applies.
• FHA loans. The minimum down payment is generally 3.5% for borrowers with a credit score of 580 or higher. FHA mortgage insurance often lasts the life of the loan when the down payment is under 10%.
• Conventional low-down programs. Fannie Mae and Freddie Mac offer 3% down options for eligible buyers, and conventional PMI can usually be removed once you build enough equity.
• Down payment assistance. State and local housing agencies run grants and forgivable loans, usually with income and purchase-price limits.
• Seller concessions and assumable loans. A seller credit can cover closing costs, and some FHA, VA and USDA loans can be assumed, which may let a buyer inherit a lower rate. Assumption requires lender approval and usually a large payment to cover the seller's equity.

Limits and counterpoints to the video

Turner's approach is a useful starting point, but it leaves some things out.

No equity cushion. With 100% financing, a modest price decline or closing costs rolled into a sale could leave you owing more than the home is worth. A down payment is partly a buffer.

Cheaper purchase price, higher living costs. A house 35 to 40 miles from a major employer means more driving, which means fuel, maintenance and time. Septic systems and wells, which Turner mentions as ways to avoid city utility bills, bring their own maintenance costs. Property taxes and, in many states, insurance can also rise after purchase. Our guides to why property taxes keep going up and homeowners insurance increases explain how to plan for both.

Income cap. Households above the limit cannot use the program, and the cap is tied to household size, not just the buyer.

A promotional lens. The video is built around a specific new-construction listing. Builder deals may include upgraded lender incentives that require using a preferred lender. Compare quotes from at least two or three lenders, including ones not recommended by the builder.

Credit tools. Turner recommends a paid FICO subscription at about $40 a month. It shows the same kind of credit file mortgage lenders use, but you can also pull free weekly reports from all three bureaus at AnnualCreditReport.com. Scores differ between products, so ask the lender which version it will use.

What this means for you

If you are a buyer

Check USDA eligibility before assuming a zero-down loan is out of reach. Use the agency's address and income tools, then ask a lender for a written estimate that includes the upfront fee, annual fee, taxes and insurance. Pull your credit reports early, dispute errors in writing, and give yourself time. Budget for earnest money, inspection, appraisal and moving costs, because 100% financing does not cover them. Compare the monthly payment, not just the cash needed at closing.

If you are a seller or builder

USDA and other zero-down buyers expand your pool, especially outside big metros. Know the concession limits for each loan type and be ready for the appraisal to test your price. Properties must also meet the agency's condition standards.

If you are a current owner

You generally cannot use USDA to buy a second home, but you may qualify later if you sell and no longer own adequate housing. If you hold a USDA or FHA loan with insurance for life, a refinance when rates and equity allow can be worth running the numbers on. Track today's rates through Freddie Mac's weekly survey.

What to watch next

Three things can change the math. First, USDA income limits and fee levels are updated periodically, so confirm figures before applying. Second, mortgage rates drive the monthly payment far more than a $150 insurance fee. Third, builder incentives tend to rise and fall with inventory and sales pace. Anyone who wants a no-down loan should treat the video as a prompt to ask questions, not as a substitute for a lender's quote.

This article is general information, not personal financial advice. Talk to a HUD-approved housing counselor or a licensed loan officer about your own situation.