Jeff Merrill | Sioux Falls Realtor

By Jeff Merrill | August 13, 2026

If you’ve been told you need 20% down to buy a house, that’s a myth — and if you’re willing to look a few minutes outside Sioux Falls, you may not need any down payment at all.

The USDA loan is the most overlooked tool for buyers in this market. It’s a real 0%-down mortgage backed by the U.S. Department of Agriculture, and it’s built for exactly the towns that ring Sioux Falls. Most buyers have never heard of it because it isn’t advertised the way FHA and conventional loans are, and because the eligibility map trips people up.

Here’s how it actually works around here, what it costs, and how to find out in five minutes whether the home you want qualifies.

Why Sioux Falls itself doesn’t qualify — but the towns around it do

USDA loans are only for homes in areas the government defines as rural. In practice, that means communities outside the Sioux Falls urbanized area, generally in towns under about 35,000 people that aren’t attached to the metro’s continuous development.

That rules out most of what people think of as “Sioux Falls.” The city proper is off the table. So are the parts of Tea, Harrisburg, and Brandon that have filled in and connected to the city — those neighborhoods have grown right out of eligibility over the past decade.

But drive fifteen or twenty minutes and the map opens up. The communities that typically qualify include:

• Dell Rapids and Baltic to the north
• Hartford, Crooks, and Colton to the west
• Lennox, Canton, and Chancellor to the south
• Madison, Mitchell, Canistota, Salem, and Parker farther out
• Nearly all the rural acreage and unincorporated land between these towns

If you’re open to a short commute or you already work outside the city, USDA can put you in a home for no money down that would’ve cost you $15,000 or more up front on a conventional loan.

One important note: these boundaries shift. USDA redraws the map as towns grow, and eligibility is set by the exact property address, not the town name. Part of a town can qualify while another part doesn’t. Before you fall in love with a listing, check the specific address on USDA’s eligibility map at eligibility.sc.egov.usda.gov — it’s free, it takes two minutes, and it’s the first thing I run for buyers considering this route. This is also the piece most out-of-state lenders get wrong, so it pays to work with someone who knows which streets in Harrisburg or Tea sit on the eligible side of the line.

What it actually costs to use a USDA loan

“Zero down” is real, but it isn’t “zero cost.” Here’s the honest math.

There’s no down payment and no traditional PMI. Instead, USDA charges two fees that fund the program:

• Upfront guarantee fee: 1% of the loan. On a $300,000 home that’s $3,000 — and you can roll it into the loan instead of paying cash.
• Annual fee: 0.35% of the balance, paid monthly. On that same $300,000 loan it’s about $88 a month in year one, and it drops as you pay the loan down. That’s cheaper than the mortgage insurance on a low-down FHA or conventional loan.

You’ll still have closing costs — appraisal, lender fees, title company charges, and prepaid taxes and insurance — which run roughly 2% to 5% of the price, the same buckets I break down in my guide to buyer closing costs in Sioux Falls. The difference with USDA is how you cover them. The seller can pay your closing costs as a concession, and if the home appraises above the purchase price, USDA lets you finance the closing costs into the loan — something FHA and conventional won’t do.

Put it together with a $300,000 home in Dell Rapids or Madison:

• USDA: $0 down. Roll the $3,000 guarantee fee in, ask the seller to cover closing costs, and you can walk in with almost nothing out of pocket.
• Conventional at 5% down: $15,000 down plus $8,000–$12,000 in closing costs — north of $23,000 cash.

That $15,000 gap is the whole point. For a lot of buyers, USDA isn’t about a lower payment — it’s the difference between buying this year and waiting three more years to save.

Do you qualify? Income, credit, and the property

USDA has three tests, and all three have to pass.

Income — there’s a ceiling, not a floor. USDA is for low-to-moderate income households, so unlike most programs, you can earn too much. For 2026 the base moderate-income limit is around $122,800 for a one-to-four-person household and $162,100 for five to eight people, though the exact figure varies by county and household size. The limit counts everyone’s income in the home, not just the borrowers. Most working families around Sioux Falls come in under it comfortably — verify your number with a local lender before you assume you’re out.

Credit — flexible but not nonexistent. Most lenders want around a 640 score for the streamlined automated approval. Below that, a manual underwrite is still possible with a solid rent and bill-payment history. USDA tends to be more forgiving than conventional here.

The property — primary residence, safe and sound. The home has to be your primary residence, modestly sized, and in livable condition. Acreage properties on well and septic get an extra look — a water test and a septic check are common — which matters if you’re eyeing a place outside Canton or Canistota.

There are actually two USDA programs. The Guaranteed loan (Section 502 Guaranteed) is the common one — you get it through an approved local lender, and it fits moderate-income buyers. The Direct loan (502 Direct) comes straight from USDA for very-low and low-income buyers and can carry a subsidized rate, but it has tighter income limits and a longer process. Most buyers I work with use the Guaranteed program.

USDA also stacks well with other help. If you’re a first-time buyer, it’s worth comparing it side by side with the South Dakota down payment assistance programs — and before you shop either way, it helps to know how much house you can actually afford in this market so you’re looking in the right price range from day one.

Frequently Asked Questions

Can I use a USDA loan to buy a house in Sioux Falls?

Not within the city or its built-out suburbs — Sioux Falls, and most of Tea, Harrisburg, and Brandon, have grown past USDA’s rural boundaries. You can use it in nearby towns like Dell Rapids, Hartford, Madison, and Canistota, and on rural land between them. Always confirm the exact address on USDA’s eligibility map, since eligibility is set property by property.

How much income can I make and still qualify for a USDA loan?

USDA has a maximum, not a minimum. For 2026 the moderate-income limit is roughly $122,800 for a one-to-four-person household and $162,100 for larger households, counting everyone’s income in the home. The exact cap depends on your county and household size, so check with a local lender for your specific number.

Is a USDA loan really zero down?

Yes — USDA finances 100% of the purchase price with no down payment required. You’ll still owe a 1% upfront guarantee fee (which you can roll into the loan) and a small 0.35% annual fee paid monthly, plus normal closing costs that the seller can often help cover.

What credit score do I need for a USDA loan near Sioux Falls?

Most lenders look for a 640 or higher for the streamlined automated approval. If you’re below that, a manual underwrite is still possible with strong rent and bill-payment history — USDA is generally more forgiving than a conventional loan.

How long does a USDA loan take to close?

Plan for a slightly longer timeline than a conventional loan, often 30 to 45 days, because USDA does a final review after the lender. For homes on well and septic, budget extra time for the water and septic checks. Starting with a fully underwritten pre-approval keeps it on track.

The bottom line

If a down payment is the only thing standing between you and a home, a USDA loan is worth a serious look — as long as you’re open to the towns that ring Sioux Falls rather than the city itself. Dell Rapids, Hartford, Madison, Canistota, and the acreage in between can put you in a house for essentially nothing down.

The catch is the map, and that’s exactly where a local agent earns their keep. I can pull up any address, tell you in minutes whether it qualifies, and connect you with a lender who actually does USDA loans in this market instead of one who’ll tell you it’s “too complicated.”

If you’re wondering whether zero-down could work for your situation, call or text me at 605-201-2846, or reach out through siouxfallsgreathomes.wordpress.com. Let’s find out what you can actually buy.

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About Jeff Merrill
Jeff Merrill leads The Jeff Merrill Team, powered by eXp Realty, serving Sioux Falls and the surrounding South Dakota communities of Madison, Mitchell, Canistota, and beyond. He helps motivated buyers, sellers, and new agents cut through the hype in real estate with honest guidance, hands-on mentorship, and a track record of real results. Connect with Jeff at siouxfallsgreathomes.wordpress.com or call 605-201-2846.