Zero-down loans exist in rural areas (© Dana Hoff/Beateworks/Corbis)


© Dana Hoff/Beateworks/Corbis


The zero-down mortgage is still alive through the Agriculture Department's rural-development housing program.

People buy houses without down payments or mortgage insurance with USDA loans. The catch? The property must be in a designated rural area. The surprise? Some eligible properties are in places that most people would not consider rural. (Bing: )

"The terms of eligibility for a USDA loan are twofold, because not only does the borrower need to qualify, but so does the property," says Tommy Xintaris, a senior mortgage banker with Envoy Mortgage in Houston, which lends throughout Texas. "It's a small box that borrowers have to fit into, but it's a great program if they do."

Do you qualify?
First, to be eligible, the property must be in a designated rural area. The USDA website lists counties designated as rural. But some properties are eligible for USDA loans in counties that are not designated rural, Xintaris says. There are eligible homes on the outskirts of Austin, Texas, for example.

"The best way to find out about property eligibility is to enter an exact address (on the USDA site)," Xintaris says.

After the home's location is deemed eligible, the borrower must meet income and credit standards.

"Borrowers must have a low to moderate income and yet be able to afford the payments on the property," says Paul Defngin, a mortgage planner with Apex Home Loans in Rockville, Md. "USDA has established income limits. Borrowers can enter their ZIP code, income and number of members of the household and will know immediately if they qualify for the program."

To check on income limitations by county, go to the USDA's income-eligibility site.

Defngin says borrowers must demonstrate they can afford the mortgage payments by meeting the USDA debt-to-income ratios of 29% for the housing payment and 41% for the overall debt to gross monthly income.