USDA Loans
USDA loans are backed by the U.S. Department of Agriculture and offer 100% financing for low- to moderate-income buyers in eligible rural and suburban areas.
At a glance
| Minimum down payment | 0% |
|---|---|
| Minimum credit score | 640 (most lenders) |
| Maximum loan amount | No fixed maximum; capped by your debt-to-income and the area's income limits |
| Mortgage insurance | Upfront guarantee fee of 1% rolled into loan + annual fee of 0.35% (much cheaper than FHA MIP) |
Best for
- Buyers in eligible rural or suburban areas
- Low- to moderate-income households (115% of area median income or less)
- First-time and repeat buyers with no down payment savings
- Borrowers with steady income but limited assets
Eligibility requirements
- Property must be in a USDA-eligible area (use the USDA's online eligibility map)
- Household income at or below 115% of the area median income
- Credit score typically 640+ (some lenders go lower with manual underwriting)
- Property must be the primary residence
- U.S. citizenship or permanent residency
- Home must meet USDA appraisal standards
Pros
- Zero down payment required
- Lower mortgage insurance costs than FHA
- Competitive interest rates
- More suburban areas qualify than people realize
- Closing costs can be financed if appraisal supports it
Cons
- Strict geographic eligibility limits where you can buy
- Household income caps disqualify higher earners
- Only for primary residences
- USDA appraisal can flag property condition issues
Documents you'll need
- Two most recent pay stubs
- Two years of W-2s and tax returns
- Two months of bank statements
- Photo ID and Social Security card
- Documentation of all household income (including non-borrowing adults)
Is the USDA loan a hidden gem?
For eligible borrowers in eligible areas, USDA financing is often the best deal in the entire mortgage market — even better than FHA on monthly cost. The biggest barrier is awareness; many buyers assume they don’t qualify because they don’t picture themselves as “rural.”
Before you write off USDA, check the eligibility map. Many small towns and outer suburbs of major metros qualify, and the savings versus FHA over 30 years can be substantial.
Frequently asked questions
- Are USDA loans only for farms?
- No. USDA loans are for residential properties in eligible rural and suburban areas — most homes outside major metro centers qualify. Use the USDA eligibility map to check a specific address.
- What's the income limit for a USDA loan?
- Household income must be at or below 115% of the area median income, adjusted for household size. The exact limit varies by county and is updated annually.
- Can I buy a fixer-upper with a USDA loan?
- USDA loans require the property to be safe, sanitary, and structurally sound at closing. Major renovations should be handled through a USDA renovation loan or a different program like the FHA 203(k).
- How does USDA mortgage insurance compare to FHA?
- USDA's 0.35% annual fee is significantly cheaper than FHA's 0.55%. Over a 30-year loan, this saves thousands of dollars.
Related loan programs
- FHA Loans — FHA loans are insured by the Federal Housing Administration and let you buy with as little as 3.5% down and a 580 credit score, making them a top choice for first-time buyers and credit rebuilders.
- VA Loans — VA loans are guaranteed by the Department of Veterans Affairs and let eligible veterans, active-duty service members, and surviving spouses buy with zero down payment and no monthly mortgage insurance.
- Conventional Loans — Conventional loans aren't backed by a government agency, follow Fannie Mae and Freddie Mac guidelines, and reward strong credit with the lowest rates and most flexible terms available.