The USDA Loan is a mortgage option available to some rural and suburban homebuyers. USDA Home Loans are issued by qualified lenders and guaranteed by the United States Department of Agriculture (USDA).

  • $0 down, 100% financing + required guarantee fee = 102% of the appraised value
  • Low FICO score requirements
  • Low interest rates
  • Low closing costs
  • Gift funds can be used for closing costs
  • 30-year, fixed-rate mortgage

Eligibility is based on the property size, location and condition along with income and other qualifying factors. Some of these requirements include:

  • Property must be located in a USDA designated rural area
  • Maximum loan limits vary based on location
  • Household members can have a total income of up to 115% of the medial income for the area
  • Household must be able to afford the mortgage payment, including property taxes, homeowners insurance and the annual guarantee fee payable on a monthly basis

Are USDA guaranteed loans solely for low-income borrowers?

No. While USDA loans can benefit low-income borrowers tremendously, buyers with higher income can apply for USDA loans as well.

Regarding income limits, the USDA will approve any borrowers with an income that does not exceed 115% of the median income in the area, based on your family size. For example, if the median income of USDA-approved area averages at $100,000, eligible borrowers must have an income of $115,000 or less.

How much can a USDA loan finance for home purchase?

USDA loans can finance a home purchase entirely, meaning borrowers are not obligated to pay a down payment. While the government charges a 2.0% guarantee fee for Rural Development loans, the USDA also finances up to 102% of the mortgage, allowing borrowers to include closing fees or a portion of the guarantee fee within the loan balance.

Does the USDA enforce any restrictions on property location?

Yes. USDA loans can only apply toward home purchases in areas deemed “rural” by the USDA.  Fortunately, this definition is fairly open and includes many small towns, suburbs, and exurbs of most major cities.

Most homes just outside of major cities qualify.

To find out if your prospective home purchase satisfies this requirement, visit the official USDA Property Eligibility page.

Can I obtain a USDA mortgage after a bankruptcy?

As with other loan programs, USDA loans include a mandatory waiting period for borrowers who have recently filed for bankruptcy. Borrowers who have undergone a Chapter 7 bankruptcy must wait a minimum of 3 years from the discharge date before regaining USDA eligibility.

For Chapter 13 bankruptcy, borrowers must wait a minimum of one year, provided that all court payments have been made on time.

What are the down payment requirements for USDA loans?

None. The loan requires zero down payment.  If the home appraises for higher than your purchase price, you can potentially even finance up to 102% of the purchase price to help cover closing costs.