USDA Loans
USDA loans offer 100% financing with no down payment for homes in eligible rural and suburban areas. With lower mortgage insurance than FHA and competitive rates, USDA is one of the best deals available for eligible buyers.
Program Details
Key Benefits
- 0% down payment
- Low 0.35% annual fee
- No maximum loan amount
- Competitive interest rates
- 100% gift funds allowed
Program Tags
Who It's Best For
- Buyers purchasing in rural or eligible suburban areas
- Low to moderate-income buyers seeking 0% down
- First-time buyers who want to avoid down payment
- Buyers in smaller towns outside major metros
- Those who meet income limits but struggle to save for down payment
Advantages
- Zero down payment—true 100% financing
- Lower mortgage insurance than FHA (0.35% vs 0.55%)
- Competitive interest rates (often lower than conventional)
- No loan limits (must be appropriate for the area)
- Closing costs can be financed or paid by seller
- Streamline refinance available for easy rate reductions
- Gift funds allowed for closing costs
Considerations
- •Geographic restrictions—must be in eligible rural/suburban area
- •Income limits apply (115% of area median income)
- •Primary residence only—no investment or second homes
- •Longer processing time than conventional (USDA approval required)
- •Property must meet USDA standards
- •Guarantee fee adds to loan balance
Eligibility Requirements
- Property must be in USDA-eligible area (check USDA property eligibility map)
- Household income cannot exceed 115% of area median income
- Primary residence only (owner-occupied)
- U.S. citizen, U.S. non-citizen national, or qualified alien
- Must demonstrate creditworthiness and repayment ability
Additional Requirements
- Property must be in eligible rural/suburban area
- Total household income within USDA limits for the county
- Meet minimum credit standards (640+ for automated, lower with manual)
- USDA appraisal ensuring property meets standards
- Upfront guarantee fee of 1% (can be financed)
- Annual fee of 0.35% of loan balance
Pro Tips
- More areas are eligible than you'd expect—suburbs and small towns often qualify
- Check the USDA eligibility map early in your home search to focus on qualifying areas
- Household income includes all adults in the home, not just borrowers—but deductions may apply
- The 0.35% annual fee is significantly lower than FHA's 0.55%—real savings over time
- USDA Streamline Refinance makes it easy to lower your rate later with minimal paperwork
- Manufactured homes and new construction are eligible with proper requirements
- Seller can contribute up to 6% toward closing costs
Also Known As
Helpful Resources
Use the USDA property eligibility map at eligibility.sc.egov.usda.gov. Enter the property address to see if it's in an eligible area. Many suburban areas and small towns qualify—it's worth checking even if you don't think of the area as 'rural.'
Income limits are 115% of the area median income and vary by county and household size. For a family of 4, limits range from about $90,000 to $150,000+ depending on location. Use the USDA income eligibility tool to check your specific situation.
USDA charges a 1% upfront guarantee fee (usually financed into the loan) and a 0.35% annual fee paid monthly. This is significantly cheaper than FHA's 1.75% upfront and 0.55% annual—saving you money over the life of the loan.
For automated underwriting (GUS), most lenders require 640+. Below 640, you'll need manual underwriting, which some lenders don't offer. With strong compensating factors, some borrowers with 580-640 can qualify through manual underwriting.
Total household income includes all adult members (18+), even non-borrowers. However, there are deductions for dependents, childcare, medical expenses, and more. Only borrower income is used for qualification—total household determines eligibility.
Yes! USDA finances manufactured homes if they're on a permanent foundation, meet HUD standards, and are classified as real property. The home must be new or have been previously financed with a USDA loan.
USDA loans require approval from both the lender and USDA, typically adding 1-2 weeks to the process. Expect 30-45 days from application to closing, sometimes longer during busy periods. Start early and have patience.
Yes! USDA offers construction-to-permanent loans in eligible areas. You'll need an approved builder and plans. Single-close construction loans are available where you apply once and convert to permanent financing after construction.
Yes! Sellers can contribute up to 6% of the purchase price toward your closing costs. This can potentially cover all your out-of-pocket costs, making USDA a true zero-money-down option.
Similar to FHA and VA streamlines, USDA offers simplified refinancing for existing USDA borrowers. Requirements include being current on your loan, demonstrating a net tangible benefit (lower payment or rate), and the property maintaining eligibility.
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Typical Documents
- Last 30 days of pay stubs or income docs
- Last 2 years W-2s or 1099s (as applicable)
- Most recent 2 months of bank statements
- Government-issued ID
Exact items vary by program and scenario.
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Information provided is for educational purposes only and is not a commitment to lend. All loans subject to underwriting approval. Rates and terms subject to change. Equal Housing Lender. Equal Housing Opportunity.