What Is a USDA Loan?
A USDA loan is a zero-down-payment mortgage backed by the U.S. Department of Agriculture. Designed to promote homeownership in rural and suburban areas, USDA loans offer 100% financing, below-market interest rates, and reduced mortgage insurance compared to FHA.
Income limits are set at 115% of the area median income for the Guaranteed program. The program covers more areas than most people think — many suburbs and small cities qualify.
The surprise: USDA-eligible areas are not just farmland. Many suburbs, small cities, and towns within 30-45 minutes of major metros qualify. Check the USDA eligibility map before assuming your area does not qualify.
Who USDA Loans Are For
- Homebuyers in eligible rural or suburban areas
- Borrowers who meet household income limits (115% of area median)
- Buyers who want zero down but do not have VA eligibility
- First-time and repeat buyers purchasing a primary residence
Key Features
30-year fixed rates with no down payment. Guarantee fee is 1.0% upfront (financeable) and 0.35% annually — significantly lower than FHA mortgage insurance. Credit score minimums are typically 640 for automated approval. Seller concessions up to 6%. No loan limits — the constraint is income, not loan size.