USDA Loans: The Zero-Down Mortgage With a Surprising Income Limit

What Is a USDA Loan?

When it comes to affordable home financing, USDA loans are one of the best-kept secrets in the mortgage world. Backed by the U.S. Department of Agriculture, these loans are designed to help low- to moderate-income buyers purchase homes in eligible rural and suburban areas.

The most attractive feature? USDA loans require no down payment. That’s right—buyers can finance 100% of the home’s purchase price. They also typically come with lower interest rates and reduced mortgage insurance costs compared to FHA or conventional loans.

But while they’re a fantastic option for many buyers, there’s a catch: you can make too much money to qualify.

Understanding the Income Limits

Most people assume the more money you make, the easier it is to get a mortgage. With USDA loans, the opposite can be true. These loans are specifically meant for households with limited incomes, and strict caps apply.

Here’s where things get a bit tricky—there are two different income tests you have to pass for USDA eligibility:

1. Qualifying Income

2. Maximum Household Income

1. Qualifying Income: How Much You Can Borrow

Qualifying income is what lenders use to determine how much house you can afford. This includes stable and verifiable income sources like your salary, hourly wages, and commissions or bonuses if they’re consistent. Lenders will calculate your debt-to-income ratio (DTI) using this number to see if your mortgage payments will be manageable.

2. Maximum Household Income: The USDA Limit

The second test—the maximum household income—is what trips up many applicants.

To qualify for a USDA loan, your total household income must fall below a set threshold. This figure varies by location and household size and is updated annually. But here’s the twist: USDA counts all household income, not just the income of the person applying for the mortgage.

That means if your spouse, partner, adult children, or even grandparents living with you earn money, their income gets added to the total—even if they’re not on the loan.

So yes, you could have perfect credit and afford the mortgage, but still be denied because your household income exceeds the USDA limit for your area.

Why This Matters More in 2025

As of 2025, the median home price in the U.S. continues to hover near historic highs, with inventory shortages keeping competition tight in many areas. USDA loans can be a huge help for buyers trying to get into a home without a large cash reserve—but income limits can be a barrier, especially as wages have climbed in recent years.

Many buyers who might have qualified for USDA financing a few years ago are now finding themselves just above the income cutoff, even though home prices haven’t gotten any easier to manage.

How to Check If You Qualify

Before getting too far into your home search, it’s smart to check two things:

• Property eligibility: USDA loans are only available in certain areas. You can easily check this with the USDA’s online tool.

• Income eligibility: Look up the income limits for your county and household size. These vary significantly by region and can be impacted by deductions for child care expenses and other factors.

If you’re close to the limit, don’t panic. Some household expenses can be deducted from your income calculation, which might bring you back under the threshold. A loan officer experienced with USDA loans can help you figure out what counts and what doesn’t.

Final Thoughts

USDA loans offer unbeatable benefits for the right buyer—no down payment, low interest rates, and reduced mortgage insurance. But they come with a few unique rules, especially around income.

If you’re considering a USDA loan, make sure you understand both how much you can afford and whether your household income falls within the limits. Because in this case, making more money could actually work against you.

Work with a knowledgeable lender to assess your situation early. It could be the key to unlocking one of the most affordable paths to homeownership in today’s competitive market.

Sources

• Forbes – https://www.forbes.com

• Investopedia – https://www.investopedia.com

• U.S. Department of Agriculture – https://www.usda.gov

• CBS News – https://www.cbsnews.com