The USDA Rural Housing 502 guaranteed loan program still offers 100% mortgage financing in qualified locations in Tennessee. With relaxed qualifying terms, minimal mortgage insurance and no loan limits, this program is great for TN first-time home buyers.
While it might seem to be too good to be true on the surface, this government-backed mortgage does require a few eligibility requirements to be met. However, if you and the household meet the USDA’s income and location criteria, the program could be a good option for you.
The key eligibility limitation for the USDA program is that the house has to be in what the USDA considers a “rural” area. Now, it’s important to understand the USDA’s definition of rural is relatively broad. In fact, many suburban locations just minutes outside Nashville, Memphis, Knoxville, and Chattanooga ARE still eligible. Overall, if you aren’t in the middle of a congested metropolitan area, there’s a good chance that your property will be eligible. Reach out to us anytime by calling the number above to discuss your location in detail.
The USDA doesn’t impose any official price or loan amount limits on the home that you buy. On the other hand, the USDA’s income rules do impose a debt-to-income ratio limit for home buyers – just like other mortgage programs. Given that the USDA usually applies a 34 percent front-end debt-to-income ratio to determine how large your mortgage payment can be, a family making $4,500 per month ($54,000 per year) would be limited to a monthly payment of around $1,530 which is 34% of the monthly gross income.
As your income goes up or down, your maximum payment can also fluctuate up or down. Then again, the program also has the flexibility to allow higher monthly payments for otherwise well-qualified buyers who have a great credit score or saving for the down payment. Applicants can use the helpful USDA mortgage calculator on this page to help determine their monthly payments.
USDA limits the property types that are considered eligible. Most single-family homes, townhomes, and condos located in eligible areas are approved, regardless of the home seller. However, homebuyers cannot use a USDA loan to purchase a property with additional units or with any additional structures that they might use for income.
An example would be a large acreage, a barn or a rentable in-law suite would likely be ineligible, while a small storage shed would be okay.
All approved properties should have adequate mechanical systems and be termite-free. It also has to meet the USDA’s standards for being decent, safe, and sanitary. The home must meet all the same HUD standards that apply to other government home loans like FHA, and VA.
The home the USDA will approve for you varies based on your income and its location. The USDA imposes income limitations that vary by area, and your household income can be no more than 115% of the area’s median income. The income limit in most Tennessee counties for a household of 1–4 members is $112,450, even higher for high-cost counties, or larger households. Please read more about the 2025 USDA income limits here. As for the property, USDA will permit any single-family home that is located in a USDA-approved area.
You can look up your city or an actual address to see if it’s approved. Keep in mind, that USDA is not concerned with the home seller or whether the home is being sold as a regular sale, foreclosure, etc. The actual location of the home is what’s important.
Tennessee home buyers who have questions about the USDA home application process can contact us at the number above 7 days a week. You can also expedite your inquiry by submitting the Quick Contact form on this page.
The Tennessee USDA home loan program is intended to provide moderate-income homeowners with 100 percent financing – no down payment. United States Department of Agriculture loans, also known as Rural Housing or Rural Development, are available to approved buyers in almost every county in TN. This government-backed mortgage program offers some great perks, especially for first-time home buyers. Let’s look at the Tennessee USDA loan details below.