Hero Image

USDA Loans: What They Are And Who They’re For

Estimated Credit Score

Great. With this information, we can start a loan estimate for you. Share your contact info so we can share it with you.

Thank you for reaching out. A member of our loan team will be in touch shortly.



What is a USDA Loan?

USDA loans are a type of mortgage loan backed by the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans are designed for low-to-moderate-income home buyers who are buying a home in a USDA-eligible rural area. Since USDA loans are federally guaranteed, they provide lenders a safety net in case the borrower can’t make their mortgage payment. This allows for USDA home loans to offer 100% financing and low interest rates. With no down payment required, USDA loans have helped many people access home ownership who otherwise would not have been able to afford a home.

Property Eligibility

Do rolling pastures and farmland come to mind when you think of USDA loans? You’re not alone, but the truth is that the USDA defines a rural area in much broader terms than you might think. Approximately 97% of land across the country qualifies for a USDA loan, including some suburban areas not too far from city limits. Don’t write off considering a USDA loan until you check whether your property is eligible.

Eligibility requirements

To qualify for a USDA loan, home buyers must:

  • Purchase a home in a USDA-eligible area

  • Meet minimum USDA credit requirements and guidelines set by your lender

  • Meet the income limits for the area

  • Occupy the home as a primary residence

  • Be a U.S. citizen, U.S. non-citizen national, or qualified alien

What’s the deal with income limits?

USDA loans are targeted toward moderate earners, and home buyers must meet income requirements to be eligible. These limits vary by location, and borrowers must earn less than 115% of the median income for their region to qualify.

USDA Guarantee Fee

Although a down payment is not required, borrowers are responsible for a 1% guarantee fee. The good news is this can be rolled into closing costs. You should also be aware that USDA home loans include a 0.35% annual mortgage insurance (MI) fee paid in monthly installments.

Let’s break it down: A home buyer who purchases a $100,000 home with no down payment would pay a $1,000 mortgage insurance premium as part of their closing costs, plus a monthly mortgage insurance payment of $29.17. When you compare USDA loan fees to other loan programs, like FHA, these fees are relatively low, which makes them a great option for eligible borrowers.

USDA Mortgage Rates

Because USDA loans are guaranteed by the U.S. government, they can offer some of the lowest interest rates available. This guarantee protects lenders against potential loss, which allows banks and mortgage companies to offer lower rates to home buyers. Don’t forget that, just like with any other type of mortgage, your credit score, amount of debt, and income are all factors that impact your interest rate. If you have questions about your credit score, you should talk to your lender.

Apply for a USDA Loan

Unlike other loan programs, USDA loans can only be issued by USDA-approved lenders. Our mortgage experts are experienced with USDA loans and can help make the process easy for you.

Start Your USDA Loan