Zero Down Payment, Real Closing Costs: Pairing Home Plus DPA with a USDA Loan

Zero Down Payment, Real Closing Costs: Pairing Home Plus DPA with a USDA Loan

The USDA guaranteed loan wipes out the down payment. It does not wipe out the closing table: appraisal, title insurance, escrow funding, and prepaid taxes all still show up expecting payment. Arizona runs a state assistance program that can cover a real chunk of that bill, and it stacks neatly on top of a USDA loan.

The USDA Side, Compressed

If you are new to the program: the USDA guaranteed loan (Section 502) needs no down payment, runs as a 30-year fixed, and asks that household adjusted income fit under the USDA moderate-income limit for the county where the home sits. The property has to be in an eligible area, and eligibility is decided address by address on USDA's official map. We keep the full walkthrough, including the income math, on our USDA home purchase page, so I will leave the full story there.

What Home Plus Brings

Home Plus is Arizona's flagship down payment assistance program, run by the Arizona Industrial Development Authority. It provides a second mortgage worth up to 4% of the loan amount, at 0% interest, deferred for as long as you keep the home. No monthly payment on it, and no interest piling up in the background.

The sweet part is the clock. The second mortgage is forgiven once you have owned the home for 60 months. Sell or refinance before then and the assistance is repaid out of that transaction-- past that marker, it is just gone. USDA appears on the program's own list of compatible first mortgages, and the current figures live on the Home Plus program page; the Arizona IDA site runs the program umbrella.

Also worth knowing: the assistance lands at closing as a recorded second mortgage on your home. It is real money with real paperwork, not a rebate-- which is why the forgiveness clock and the repayment window are worth putting on your calendar.

The income cap trips people up, so it deserves its own sentence: it reads to the borrower, not the household. Borrower annual income at or under $155,386 is the published line.

Two Income Tests, and Why Adjusted Is the Magic Word

Stacking the programs means passing two different income checks. USDA asks whether household adjusted income fits the county's moderate-income limit. Home Plus asks whether borrower income fits its own cap. Different denominators, different limits, same application.

Here is the distinction in practice. USDA counts everyone in the household, including people who will not be on the loan-- a working teenager, a parent living with you, all of it feeds the adjusted-income math. Home Plus counts only the borrowers on the application. A three-generation household can brush against one test and clear the other easily, which is exactly why you run both before ruling anything out.

The word doing quiet, wonderful work in the USDA test is "adjusted." Before household income is measured against the limit, certain costs come out of the math first. The big one for young families: care for a child age 12 or under while a household member works, per 7 CFR 3555.152. Families paying for daycare or after-school care often qualify at a higher purchase price than they first assumed. I have watched that deduction turn a "we probably make too much" conversation into a preapproval.

The Class Is Part of the Deal

Home Plus requires borrower education before closing. Plan on a few hours, available online, covering budgets, closing documents, and what homeownership actually costs month to month. First-time buyers grumble about it going in and name it a highlight coming out. There are worse things than a free class before the largest purchase of your life.

What the Stack Looks Like at the Table

Down payment: zero, courtesy of USDA. The upfront guarantee fee can be financed into the loan amount, and the seller is allowed to contribute up to 6 percent of the sales price toward your costs. Home Plus then lands up to 4% of the loan amount against closing costs. For the right buyer, the cash needed to close can get pretty close to zero.

Prepaids are the line item people forget: your first chunks of property taxes and homeowners insurance get funded at closing too. That is the bucket Home Plus money covers once seller credits run out.

A fee honesty note, because this is a blog with standards: the guarantee fee caps (3.5% upfront, 0.5% annual) are written into federal regulation, while the levels in effect reset every fiscal year and get confirmed at quoting time. My post on USDA fees and the fiscal-year reset explains which number is which.

Who Should Look at This Stack

If you are buying in Arizona, your income is moderate for your county, your target home sits in an eligible area, and cash for closing is the last hurdle-- this combination was built for you. Start with the USDA home purchase guide, and if USDA is one option among several, our zero down mortgages guide compares every no-down-payment path available to Arizona buyers. One last honest note: assistance figures get adjusted from time to time, so re-confirm the $155,386 cap and the 4% figure when you actually apply. They are current as I write this in October 2026, and that is the date they belong to. Questions about your own numbers, call me at (480) 613-8040.