Loan programs
USDA loans
Backed by the Department of Agriculture, and far less rural than the name suggests. The map covers plenty of commuter towns nobody would call countryside.
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- No documents
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At a glance
- Credit scoreCommonly 640Lower is possible with manual underwriting
- Down payment0%No down payment required
- LocationMust be eligibleCheck the address, not the town name
- IncomeCappedBased on household size and area
USDA in numbers
Eligibility decides everything here
Area and income limits published by USDA Rural Development.
A USDA loan is guaranteed by the Department of Agriculture and made by a private lender. No down payment needed. That puts it alongside VA as the cheapest way in.
Two things decide if you can use it. Where the house is, and what your household earns.
Loan program
USDA at a glance
For eligible rural and suburban areas
The requirements
What you need to qualify
All three have to be true
- Check 1LocationMust be eligibleCheck the address, not the town name.
- Check 2IncomeCappedBased on household size and area.
- Check 3PropertyPrimary residenceThe property has standards too.
| Requirement | Typical minimum | Worth knowing |
|---|---|---|
| Credit score | Commonly 640 | Below that may need manual underwriting |
| Down payment | 0% | None required |
| Location | Eligible area | Determined by address, not town or county |
| Household income | Within the cap | Typically tied to area median income |
| Property | Primary residence | Cannot be a farm or investment property |
Scroll sideways to see all columns.
These are the lowest a program allows. Lenders often want more. That is called an overlay. Compare all five programs →
The detail
What makes this program different
Check the address, not the assumption
The map covers many small towns and outer suburbs. Plenty of buyers rule themselves out on a guess. Looking up an address takes a minute.
Income is capped, and it counts the household
Limits compare your total household income to the area median, adjusted for household size. Income from adults not on the loan can still count.
Fees are lower than FHA, but permanent
There is a fee up front and a smaller one each year. The annual fee is usually cheaper than FHA. Like FHA, it does not cancel.
The property has standards too
It has to be your main home and meet condition standards. Working farms and rental properties do not qualify.
Find out before you rule it out
Checking costs nothing and takes about 90 seconds.
See what I qualify for
Honestly
Is a USDA loan right for you?
Good fit if
- The address falls inside an eligible area
- Your household income sits under the local cap
- You have little or nothing saved for a down payment
- You are buying a home to live in, not to rent out
Look elsewhere if
- You are buying in a city or a large suburb
- Your household income is above the area limit
- You want an investment property or second home
- You qualify for VA, which has no annual fee at all
Being honest
When a USDA loan is the wrong choice
Zero down is compelling, but the eligibility rules rule a lot of people out.
The property is not in an eligible area
This is the first thing to check and it decides everything else. Eligibility is set by address, and the maps are redrawn periodically, so a home that qualified two years ago may not now.
Your household income is above the cap
USDA counts total household income, not just the borrowers on the loan. An adult earner living with you can push a file over the limit even though they are not buying.
You want a second home or investment property
USDA is for a primary residence only. Investment purchases need conventional financing.
You need to close quickly
USDA files pass through an agency review step in addition to lender underwriting, which can add time that a competitive offer does not have.
The exit
How the guarantee fee compares
USDA has no monthly mortgage insurance in the conventional sense. Instead there is an upfront guarantee fee and a smaller annual fee, both set by the agency and both subject to change.
The annual fee is generally lower than FHA's equivalent, which is what makes USDA cheaper to run for buyers who qualify. Unlike conventional PMI, though, it is not cancelled at an equity threshold.
The usual exit is the same as FHA. Once you have enough equity and a qualifying credit score, refinancing to a conventional loan removes the annual fee. Work out whether the maths supports it before you move.
Questions
Common questions
Is a USDA loan only for farms?
No. The eligibility map covers many small towns and outer suburbs that nobody would describe as rural. What matters is the specific address, not the character of the area.
What credit score do you need for a USDA loan?
Most lenders look for around 640 for automated approval. Lower scores can sometimes work through manual underwriting, though fewer lenders will take it on.
What are the USDA income limits?
Limits are set by area and household size, generally tied to the area median income. They change over time, so check the current figure for the specific county.
Do USDA loans have mortgage insurance?
Not by that name. There is an upfront guarantee fee and a smaller annual fee, which functions the same way. The annual fee is usually lower than FHA's.
Can I use a USDA loan for a second home?
No. The property has to be your primary residence. Investment properties and holiday homes are not eligible.
Keep reading
Related guides
FHA loans
The usual alternative if the address does not qualify.
Conventional loans
From 3% down, insurance you can cancel.
How to qualify
Income, credit and debt-to-income explained.
Independent sources
- USDA Rural Development — eligible areas, income limits and guarantee fees
See if you qualify
Verified income and assets, in about 90 seconds.
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