USDA Loans

USDA loans are zero-down-payment mortgages backed by the United States Department of Agriculture. These loans are designed to promote homeownership in rural and suburban areas by providing 100% financing to eligible borrowers.

Don't let the "rural" designation fool you—many suburban areas and small towns qualify as eligible USDA areas. In fact, 97% of the U.S. geographic area is eligible for USDA financing.

USDA loans offer some of the lowest interest rates available and don't require any down payment, making them an excellent option for buyers in eligible areas who want to preserve their savings.

Location: The property must be located in a USDA-eligible rural area. You can check eligibility on the USDA website by entering the property address.

Property Type: Single-family homes, townhouses, condos, and new construction are all eligible. The property must be a primary residence—investment properties and vacation homes don't qualify.

Property Condition: The home must be move-in ready and meet basic safety and livability standards. Major repairs can't be included in the loan.

Acreage: While there's no specific acreage limit, the property must have a residential character. If the property has significant acreage or agricultural income, it may not qualify.

Market Value: The property must be modest in size, design, and cost relative to the area. Luxury homes won't qualify for USDA financing.

USDA loans have income limits based on the area and household size. Generally, your household income can't exceed 115% of the median income for your area.

All household members 18 and older must have their income counted, even if they aren't on the loan. This includes children, parents, or other relatives living in the home.

Income limits vary by county and are updated annually. Your lender can tell you the specific limits for your area and help calculate your qualifying income.

Many moderate-income families qualify for USDA loans. For example, a family of four can often qualify with a household income up to $110,000 or more, depending on the area.

Upfront Guarantee Fee: USDA charges a 1% upfront fee that can be rolled into your loan amount. This is lower than the FHA upfront premium of 1.75%.

Annual Fee: There's an annual fee of 0.35% of the loan balance, paid monthly. This is significantly lower than FHA or conventional PMI.

Interest Rates: USDA loans typically have interest rates comparable to or better than conventional loans, making them very affordable.

Closing Costs: Standard closing costs apply, but they're often lower than with other loan types. Sellers can pay up to 6% toward your closing costs.

Overall, USDA loans are one of the most affordable mortgage options available when you factor in no down payment, low mortgage insurance, and competitive rates.