Purchase Loans
USDA loans are one of the best-kept secrets in residential mortgage lending — zero down payment, rates often matching or beating conventional, and mortgage insurance that costs roughly one-third of FHA’s. They’re guaranteed by the U.S. Department of Agriculture under its Rural Development program, designed to promote homeownership in rural and suburban communities rather than metro cores. Two things trip people up about USDA. First, “rural” is defined broadly — many suburbs 20 or 30 minutes outside major metros qualify, and the USDA eligibility map is the only way to know for sure. Second, USDA is the only major program with a household income ceiling (115% of area median income). All adults in the household count toward that limit, even if they aren’t on the loan. If you clear both gates, USDA often beats FHA, VA, and conventional on total cost — it’s the lowest-cost path to zero-down homeownership for non-veterans in qualifying areas.
USDA loans require the property to be located in a USDA-eligible rural or suburban area. The USDA eligibility map is the authoritative source — many suburbs qualify.
Household income cannot exceed 115% of area median income (AMI). All adult household members’ income counts, not just those on the loan.
Zero down payment is required. An upfront guarantee fee (1% of the loan amount) can be financed into the loan balance.
Annual fee is 0.35% of the loan balance, paid monthly — roughly one-third of FHA’s annual MIP. It lasts the life of the loan.
USDA is for primary residences only — no second homes, no investment properties. The home must be modest in size, design, and cost relative to the area.
Two USDA programs exist: the USDA Guaranteed Rural Housing Loan (most common, funded by private lenders with a USDA guarantee) and the USDA Direct Loan (rare, funded directly by USDA for very-low-income households).
Perfect match — zero down, below-FHA monthly costs, and no cancellation drama because the annual fee is already low. USDA is often cheaper than FHA from day one for this profile.
Many growing suburban corridors stay on USDA’s eligibility map for years. The household income cap often clears because the whole household is working toward one mortgage.
USDA documentation is manageable when tax returns support the income claim. Qualifying income is based on what the lender can document, which usually aligns with your net tax return figures.
Moderate salary plus eligible property location plus zero down payment equals the classic USDA sweet spot. Stable W-2 income makes qualifying straightforward.
Retirement income from Social Security, pensions, and IRA distributions qualifies. The 115% AMI income cap is easier to clear after paychecks stop, and no-down-payment financing preserves retirement savings.
Loan $280,000 + 1% guarantee fee ($2,800) financed → balance $282,800. Monthly principal and interest about $1,788 at a 6.5% rate. Annual fee of $989/year (0.35% × $282,800) = about $82/month. Total PITI near $2,400 after taxes and insurance.
Loan $350,000 + $3,500 guarantee fee → $353,500 balance. Monthly principal and interest about $2,235. Annual fee about $103/month. Total PITI near $2,950 after taxes and insurance.
FHA with 3.5% down: loan balance ~$294,000 after UFMIP, monthly MIP ~$135. USDA with zero down: loan balance $303,000 after guarantee fee, monthly fee ~$88. Over 7 years, USDA saves roughly $3,900 on mortgage-insurance costs and requires about $10,500 less cash to close.
Example figures use illustrative rates and are for educational purposes only. Actual rates, terms, and costs depend on credit profile, market conditions, and property specifics.
USDA beats conventional on cash-to-close (zero down vs. at least 3%) and often matches or beats conventional on rate. Conventional wins when income exceeds USDA’s 115% AMI cap, when the property is outside USDA-eligible areas, or when the borrower wants cancelable mortgage insurance.
USDA is almost always cheaper than FHA for eligible borrowers — zero down vs. 3.5%, 0.35% annual fee vs. 0.55%+ MIP, and 1% upfront vs. 1.75%. The only caveats are the income cap and location eligibility.
VA beats USDA on total cost — no annual fee at all. USDA is the non-veteran zero-down equivalent for buyers who don’t have military service eligibility.
Direct loans are funded by USDA itself with deep interest-rate subsidies for very-low-income households. Funding is limited and the program is rarer. Most USDA mortgages are Guaranteed, which is what this page covers.
Explore the programs usda rural loans — 0% down in eligible areas are most often compared against, plus the Purchase Loans hub for the full lineup and today's mortgage rates for current pricing context.
The USDA maintains an online eligibility map that shows approved areas by address. Many suburban locations outside of major cities qualify — the program covers more areas than most people expect. We can help you check eligibility for any property you’re considering.
Household income generally cannot exceed 115% of the area median income for your county. The limit applies to all income-earning adults in the household, not just those on the loan application. Limits vary by location and household size.
Yes. USDA loans do not require a down payment. There is an upfront guarantee fee of 1% of the loan amount, but this can typically be rolled into the loan balance so you don’t need to pay it out of pocket at closing.
The property must meet minimum safety and livability standards. USDA loans are intended for move-in-ready homes, though minor repairs may be addressed before or at closing depending on the situation.
Every adult in the household, whether on the loan or not. Roommates and unrelated adults count too — this is the trickiest part of USDA qualification. If an adult child works and lives with you, their income is in the total.
Typically 30–45 days — a little longer than conventional because the final loan approval requires USDA conditioning on top of lender underwriting. Budget an extra 1–2 weeks when writing a contract.
Yes, if it’s new, permanently affixed to the site, and meets HUD Code requirements. Used manufactured homes generally aren’t USDA-eligible.
No explicit loan limit, but USDA evaluates whether the home and purchase price are “modest” relative to the area. High-end purchases in qualifying areas rarely clear the review.
Guaranteed loans are funded by a private lender with USDA backing — this is what most USDA buyers use. Direct loans are funded by USDA itself with subsidized rates for very-low-income borrowers; they’re rarer and have limited annual funding.
Generally no. USDA refinance programs (streamlined and streamlined-assist) are for existing USDA borrowers only. Moving from FHA or conventional into USDA isn’t a standard program.
Start with the numbers — use the affordability calculator to see what you qualify for with USDA's zero-down structure. Then estimate your monthly payment in the mortgage calculator including USDA's guarantee fee so your PITI reflects real program costs.