USDA Loans

A USDA loan is a mortgage guaranteed by the U.S. Department of Agriculture for buyers in eligible rural and suburban areas. It requires no down payment and often carries lower monthly mortgage insurance than FHA. Two tests decide whether you qualify: where the property is and what your household earns.

The word "rural" does most of the damage here. It sends people past a program they would have qualified for.

Is my area actually eligible?

Probably more of them than you would guess. USDA eligibility is drawn by map, not by intuition, and the maps include a great many towns and outer suburbs that nobody would describe as rural.

In the markets we serve, a meaningful share of Oklahoma, Alabama, and East Texas is eligible, along with a surprising amount of the outer Inland Empire, the Central Valley, and the areas beyond the Phoenix and Tucson metros. Communities of twenty and thirty thousand people are routinely inside the boundary.

The only reliable way to know is to check the address against USDA's eligibility map. It takes a minute and it is worth doing before you assume you need a different program — because "no down payment" is a meaningful benefit to leave on the table.

What are the income limits?

USDA is designed for low- and moderate-income households, and the guaranteed loan program generally caps household income at 115% of the area median income, adjusted for household size and county.

Two things people get wrong about this:

It counts the whole household, not just the borrowers. Income from adults living in the home who are not on the loan generally counts toward the limit, even though it cannot be used to qualify. That asymmetry catches multigenerational households.

115% of median is not a low number. In many counties the limit lands well into the range most people would call middle income. Assuming you earn too much is the second most common reason people skip USDA, right after assuming they do not live rurally enough.

What does it cost?

USDA charges an upfront guarantee fee, which can be financed into the loan, and an annual fee collected monthly — structurally similar to FHA's two premiums, but historically at lower rates.

That annual fee is generally the reason USDA beats FHA on monthly payment for borrowers who qualify for both. With no down payment on either, the monthly mortgage insurance component is usually the deciding difference.

Confirm current upfront and annual fee percentages against your lender's published schedule before quoting a payment. These are set by USDA and have been revised periodically.

What else has to be true?

• Primary residence only. No second homes, no investment properties.
• The property must be modest for the area and generally cannot have income-producing structures. Working farms do not qualify under this program.
• Single-family, owner-occupied. Some condos and manufactured homes are eligible with restrictions.
• Credit is evaluated, not scored to a published floor. USDA does not set a universal minimum; lenders apply their own standards, commonly in the low 600s.

USDA against the alternatives

If you qualify for both USDA and VA, VA is usually the better loan — no mortgage insurance at all, and no income or geographic limits.

Against FHA, USDA generally wins on monthly cost for eligible borrowers, because you avoid the 3.5% down payment and typically pay less in monthly mortgage insurance.

Against conventional, it depends on your down payment. With 10% or 20% available, conventional is often cheaper overall. With nothing down, USDA is frequently the lowest-cost path to a house — if the address and the income both work.

Check before you rule it out

The two tests are quick. Give us the address and your household income and we can tell you in one conversation whether USDA is on the table.

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FAQ

Do USDA loans really require no down payment? Yes. USDA and VA are the two widely available no-down-payment programs. USDA is open to any qualified buyer meeting the location and income tests, without a military service requirement.

How rural does "rural" have to be? Less than the name implies. USDA eligibility is defined by map, and it includes many suburbs and towns of 20,000 to 35,000 people. Check the specific address rather than judging by the description.

What is the USDA income limit? Generally 115% of area median income for the guaranteed loan program, adjusted for household size and county. Income from non-borrowing adult household members typically counts toward the limit.

Can I buy a farm with a USDA loan? Not under this program. The guaranteed loan program is for modest single-family homes, and properties with income-producing agricultural operations generally do not qualify.

Is USDA cheaper than FHA? For borrowers who qualify for both, usually yes — you avoid the 3.5% down payment and the annual fee has historically been lower than FHA's annual premium.