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If you are an eligible veteran, active-duty service member, or a buyer in a qualifying rural area, you may be able to buy a home with zero down payment and no private mortgage insurance. VA loans and USDA loans are the two government-backed programs that make this possible, and both are significantly underused. In 2026, with 30-year fixed rates around 6.5%, the VA loan is consistently the lowest-cost mortgage available for eligible borrowers. Here is what each program offers, who qualifies, and how they compare.
KEY TAKEAWAYS
- VA loans: 0% down, no PMI, rates typically 0.5-0.75% below conventional, available to eligible veterans, active-duty service members, and surviving spouses.
- USDA loans: 0% down, no PMI, competitive rates, available in eligible rural and suburban areas for buyers at or below ~115% of area median income.
- VA loans have no loan limit for eligible borrowers with full entitlement in 2026 (with some lender overlays above $1M).
- USDA property eligibility is broader than most buyers expect, many suburban towns outside major metros qualify. Check the USDA eligibility map before assuming you don’t qualify.
- Neither VA nor USDA has monthly mortgage insurance. Both have one-time or annual fees instead, which are significantly cheaper over the loan life than PMI or FHA MIP.
Part of our Complete First-Time Buyer’s Guide for 2026.
VA Loans: The Best Mortgage Available for Eligible Borrowers
The VA home loan benefit is arguably the most valuable financial benefit available to U.S. military members and veterans, and it is consistently underused. Roughly 8 in 10 eligible veterans have never used a VA loan (NAR). If you served, it is almost always worth checking eligibility before exploring any other loan type.
Who Is Eligible for a VA Loan?
- Veterans: Generally eligible with 90 days of active service during wartime or 181 days during peacetime, or 6 years in the National Guard or Reserves with an honorable discharge.
- Active-duty service members: Eligible after 90 days of continuous active service.
- National Guard and Reserve members: Eligible after 6 years, or sooner if called to active duty (and meeting the active-duty service requirements).
- Surviving spouses: Unremarried spouses of veterans who died in service or from a service-connected disability may be eligible.
Get your Certificate of Eligibility (COE) at va.gov or through your lender. Most VA-approved lenders can pull it electronically in minutes.
What Does a VA Loan Offer?
- 0% down payment. No down payment required on any VA loan within lender guidelines.
- No monthly PMI. VA loans do not require private mortgage insurance regardless of LTV, a significant monthly saving versus conventional or FHA.
- Competitive rates. VA rates typically run 0.5-0.75% below conventional 30-year fixed rates because the government guarantee reduces lender risk. At mid-2026 rates, that means roughly 5.75-6.0% vs 6.5% for conventional, a meaningful difference.
- No loan limit for full entitlement. As of 2020, veterans with full VA entitlement have no VA-set loan limit. Lenders may impose their own overlays for very large loans, but most allow VA purchases up to $1M+ without additional requirements.
- Flexible credit. VA has no official minimum credit score. Most lenders set their own overlays at 580-620. See our guide to credit scores needed for a mortgage.
What Is the VA Funding Fee?
The VA funding fee is a one-time charge paid at closing that offsets program costs. It varies by down payment amount, service type, and whether you have used your VA loan benefit before:
| Down payment | First-time use | Subsequent use |
|---|---|---|
| 0% | 2.15% | 3.30% |
| 5-9.99% | 1.50% | 1.50% |
| 10%+ | 1.25% | 1.25% |
The funding fee can be rolled into the loan (financed). On a $350,000 purchase with 0% down, first use: 2.15% × $350,000 = $7,525 financed, which adds about $47/month to your payment. Compare that to PMI on a conventional loan (~$175-350/month) and it becomes clear how quickly VA loans save money.
Funding fee waiver: Veterans with a service-connected disability rating of 10%+ and surviving spouses of veterans who died in service are exempt from the funding fee entirely.
USDA Loans: Zero Down for Rural and Suburban Buyers
USDA Rural Development loans are offered through the U.S. Department of Agriculture and allow eligible buyers in qualifying areas to purchase with 0% down and no PMI. “Rural” is a misnomer, many USDA-eligible areas include suburbs, small towns, and exurbs within commuting distance of major metros.
Who Is Eligible for a USDA Loan?
USDA eligibility has two components: the property location and the buyer’s income.
Property eligibility: The home must be in a USDA-designated eligible rural area. Check the official USDA map at eligibility.sc.egov.usda.gov. The map is updated periodically, so verify even if you have checked before. Eligible properties include single-family homes, some condos, and manufactured homes on permanent foundations. Investment properties and vacation homes do not qualify, the home must be your primary residence.
Income eligibility: Your household income must be at or below 115% of the area median income for your county. This is household income, not just borrower income, all adults living in the home count. Income limits vary by county and household size. For most counties, the 2026 limit is $119,850 for households of 1 to 4 people; households of 5 to 8 get a higher limit, and high-cost counties run higher (USDA Rural Development, 2026).
Credit: No official USDA minimum, but most lenders require 640+ for automated underwriting approval. Scores below 640 may still qualify through manual underwriting with compensating factors. VA loans are more flexible for low-credit borrowers.
What Does a USDA Loan Offer?
- 0% down payment with no PMI.
- Annual guarantee fee of 0.35%/year (much lower than FHA MIP or conventional PMI at many credit tiers). On a $280,000 loan, that’s about $82/month.
- 1% upfront guarantee fee that can be rolled into the loan.
- Competitive rates comparable to FHA, typically slightly below conventional for eligible borrowers.
- 30-year fixed terms only (no 15-year or adjustable through the guaranteed loan program).
How Do VA, USDA, FHA, and Conventional Loans Compare?
| Feature | VA | USDA | FHA | Conventional |
|---|---|---|---|---|
| Min. down payment | 0% | 0% | 3.5% | 3% |
| Monthly mortgage insurance | None | ~0.35%/yr | ~0.55%/yr (often for life) | 0.5-1.5%/yr (cancellable at 80% LTV) |
| Rate vs conventional (July 2026) | ~0.5-0.75% below | Comparable to FHA | Similar or slightly below | Baseline (~6.5%) |
| Min. credit score | None official (lenders: 580-620) | 640 (auto UW) | 500-580 | 620 |
| Upfront fee | 2.15% funding fee (rollable) | 1% guarantee fee (rollable) | 1.75% MIP (rollable) | None |
| Who can use it | Veterans, active duty, survivors | Buyers in USDA-eligible areas, income limits | Most buyers | Most buyers |
| Loan limit (2026) | No VA limit (lender overlays vary) | No set limit (must qualify at 29/41% DTI) | $541,287-$1,249,125 (floor/ceiling) | $832,750 (conforming) |
Is USDA Property Eligibility Broader Than You Think?
Yes, significantly. Many buyers dismiss USDA because they assume “rural” means farmland. In practice, towns up to about 35,000 people often qualify, and many suburbs and exurbs within 30-60 minutes of major metros are USDA-eligible. Areas that recently lost eligibility can be restored; areas that were ineligible can become eligible.
Always check the USDA eligibility map directly at eligibility.sc.egov.usda.gov, do not assume based on the name of a town or county. Enter a specific property address, not just a zip code.
How to Apply for a VA Loan
- Get your Certificate of Eligibility (COE). Go to va.gov/housing-assistance or ask a VA-approved lender to pull it online (takes minutes for most applicants).
- Choose a VA-approved lender. Not all lenders do VA loans. Large national lenders (Veterans United, Navy Federal, USAA, Rocket Mortgage) specialize in VA; many regional banks and credit unions also participate.
- Get pre-approved. VA pre-approval uses your COE, income, credit, and employment history.
- Find a property. VA has minimum property requirements (MPRs), the home must be safe, structurally sound, and sanitary. A VA appraiser confirms this during the loan process, which can affect homes in poor condition.
- Close. Closing costs on VA loans can be negotiated, sellers can contribute up to 4% of the sale price in concessions. You can also roll the funding fee into the loan.
How to Apply for a USDA Loan
- Confirm property eligibility at eligibility.sc.egov.usda.gov using the specific address.
- Confirm income eligibility. Check your county’s income limits at the USDA eligibility site. Remember to include all household members’ income.
- Choose a USDA-approved lender. Many banks and credit unions participate. The USDA Guaranteed Loan Program (the most common for buyers) is originated by private lenders, not the government directly.
- Complete USDA’s required homebuyer education if required by your state program.
- Apply, appraise, and close. USDA loans typically take slightly longer to close than conventional loans (30-60 days); plan accordingly when making offers.
Frequently Asked Questions
What is a VA loan and who qualifies?
A VA loan is a government-backed mortgage available to eligible veterans, active-duty service members, and qualifying surviving spouses. It offers 0% down, no PMI, and typically the lowest rates of any loan type. Check eligibility at va.gov, most veterans who served 90+ days active duty qualify.
What is a USDA loan and who qualifies?
A USDA loan is a 0% down mortgage for eligible buyers in USDA-designated rural and suburban areas with household incomes at or below ~115% of area median income. Check property eligibility at eligibility.sc.egov.usda.gov, many suburban towns qualify that buyers overlook.
Is a VA loan really better than conventional?
For eligible borrowers, almost always yes. VA rates average 0.5-0.75% below conventional, there is no monthly PMI, and 0% down is available. The one-time funding fee (2.15% for first-time use) is typically recovered in savings within 2-3 years compared to conventional PMI costs.
Can you use a VA loan more than once?
Yes. VA entitlement is reusable as long as the previous loan is paid off or the entitlement has been restored. You can also have two VA loans simultaneously in some circumstances (partial entitlement). Ask a VA-approved lender about your current entitlement status.
Does USDA require a large down payment?
No, USDA requires 0% down for eligible buyers and properties. The trade-off is a 1% upfront guarantee fee (rollable) and a 0.35%/year annual fee. Both are significantly cheaper than FHA MIP for most loan scenarios.
Can I use a VA or USDA loan to buy in a high-cost market?
VA yes, there is no VA loan limit for borrowers with full entitlement, though lenders may have overlays above $1M. USDA is primarily designed for rural and suburban markets; high-cost coastal cities rarely have USDA-eligible properties.
Bottom Line
If you are eligible for a VA loan, use it, it is the most valuable mortgage benefit available to U.S. military members and consistently beats every other loan type on total cost. If you are buying in a USDA-eligible area and meet income limits, USDA’s zero-down option with low annual fees beats both FHA and conventional at most credit tiers. Check eligibility before defaulting to FHA or conventional.
Last updated: July 11, 2026. VA funding fees per VA.gov 2026. USDA guarantee fees per USDA Rural Development 2026. Rates approximate per Freddie Mac PMMS, July 2026. Eligibility rules subject to change, verify with an approved lender. This article is for educational purposes only and does not constitute financial or mortgage advice.
