Update: USDA has postponed map changes until October 2017 at the earliest. Going forward, USDA will review maps every three to five years to decide whether to make changes. The last review occurred in 2014. USDA home buyers now have an extended time period with which to find and buy a home within USDA-eligible areas.

The 0-down USDA home loan program has transformed from an obscure lending niche late last decade to a mainstream home buying tool today. USDA lending grew 600% from 2007 to 2013 as other 0-down lending options dried up after the housing crash.

A projected 130,000 home buyers will use USDA home loans in 2014 to purchase a house with 0 down payment and low mortgage insurance costs. Buyers with little or no money for a down payment are fueling the program’s popularity. Conventional loans require at least 5% down, and the FHA loan requires almost as much: 3.5% down.

The average home price in the U.S. is $268,500, according to a recent Mortgage Banker’s Association report. That means the typical homeowner would have to come up with a $13,000 down payment for a conventional loan and a $9,000 down payment for FHA. But the USDA mortgage eliminates this upfront, out-of-pocket expense and allows homebuyers to own their home sooner.

USDA loan requirements

The USDA loan is also known as the Rural Development loan or Rural Housing loan, since the purpose of the program is to encourage homeownership in non-urban areas. While the benefits of this loan type are many, requirements are similar to those of any other loan type.

The borrower must prove that they can repay the loan via current paystubs, W2s, and possibly tax returns. If they need their own money for closing costs, buyers need to supply bank statements to show adequate funds.

The borrower’s income must be at or below USDA income limits. These limits are based on the average income for the geographical area and the size of the family. Most buyers are well within income limits for the USDA loan. For instance, a family of four buying in the Charlotte, North Carolina area can make up to $78,800 per year. Many areas of California allow annual incomes over $100,000.

The USDA loan is very lenient on credit scores. Borrowers with a 620 or higher score can receive instant approval through USDA’s automated system to which USDA-approved lenders have access. But some borrowers with scores well below 620 will still qualify with a manual review by a USDA underwriter.

Buyers apply before changes to USDA loan map

The USDA home loan helps home buyers in rural and suburban areas and as such reserves the loan for buyers purchasing within certain geographical areas. Small cities and towns as well as many suburban neighborhoods are eligible. In fact, 97% of the nation’s land mass is within USDA rural development home loan areas, representing 109 million people. About one in three Americans are eligible.

However, the current USDA eligibility maps are based on population numbers derived from the 2000 census. Some 14 years later, new boundaries will apply starting October 1, 2015. (The changes were set happen October 1, 2014, but they were recently postponed one year.)

The new USDA maps will be based on 2010 census information. The ten years between censuses saw rapid growth in areas around metropolitan areas. Home prices grew close to city centers and populations moved outward. Small towns and outlying areas of the year 2000 have now become major population centers.

More buyers have moved up their homebuying timetable because of the upcoming map changes. Many properties and neighborhoods will not be eligible after the map updates. USDA field offices, which issue final approval for USDA loans, are reporting longer-than-usual wait times. To be approved for USDA, private lenders must approve the file, then send it to the state’s USDA office. The staff at USDA then put the final stamp of approval on the file. From there, the file goes back to the lender, which then funds the loan. Th USDA state office is a necessary and important part of the process.

As of today, the Pennsylvania USDA home loan office is working on files submitted two weeks ago, as is the Minnesota office. The USDA Rural Development office in Georgia reports it is receiving 20-30 files per day and they are 7-14 days behind. Borrowers around the country should expect state offices to be fairly backlogged.

Home buyers qualify despite map changes

Long wait times at state USDA offices shouldn’t deter borrowers. They buyers can still qualify in one of two ways. The applicant can submit their full file to a USDA-approved lender, and have the lender submit the file to a USDA office by the end of business on September 30, 2015. USDA will honor the former map if they receive complete file by that date.

Or, the buyer can look for homes within the new eligibility areas as shown here. This is the safer option, since USDA can reject any application within former boundaries if the file is incomplete.

Some buyers may have to buy a home slightly further away from cities and larger towns. However, considering USDA home loan benefits, it may be worth doing so.

Applying for this 0-down mortgage program

USDA home loans require 0 down payment which is a big help for new homebuyers who can’t afford to save up thousands of dollars before buying. Another big benefit is low interest rates – as low or lower than rates available on conventional and FHA loans.

Buyers can submit their application and receive a pre-approval from a USDA lender so they can start house shopping in eligible areas.