USDA Home Loans 

(Rural Development)

A USDA home loan is a 0% down payment mortgage designed to help eligible buyers purchase a primary residence in USDA-eligible (generally rural/suburban) areas through approved lenders. USDA doesn’t lend the money directly in this program—a lender does, and USDA provides a guarantee that helps make the program possible.

Why buyers like USDA loans

• No down payment option
• 30-year fixed (most common structure)
• Seller concessions allowed (up to 6% of the purchase price)
• Flexible guidelines compared to some other loan types (case-by-case underwriting)

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Quick Eligibility Checklist

To be eligible, borrowers generally must:

1. Buy in a USDA-eligible area (address-based) USDA Eligibility Map.
   
2. Meet household income limits (based on county + household size) USDA Income Eligibility
   
3. Use the home as a primary residence (not a rental/investment)
4. Be a U.S. Citizen / non-citizen national / Qualified Alien
5. Show stable, reliable income and acceptable credit/repayment ability (lender + USDA rules)

Detailed USDA Requirements to Qualify

1) Property location: 

Must be in an eligible area

USDA eligibility is address-specific, not “county-wide.” Some neighborhoods in a city qualify, while others don’t. 
Important: 

final eligibility is determined by USDA after a complete application is submitted.

2) Occupancy: primary residence only

• You must intend to live in the home as your primary residence.

• USDA loans are not for second homes, vacation homes, or investment properties.

3) Income limits (household income, not just borrower income)

USDA counts total household income for adults in the home (even if they’re not on the loan in many cases), and it varies by:

• property county
• household size

General rule: household income cannot exceed 115% of area median income for the location.

4) Loan limits (what’s the maximum loan amount?)

USDA guaranteed loans do not have a nationwide “loan limit” like some programs. Instead, the max loan amount is generally determined by:

• repayment ability (income, debts, qualifying ratios)
• appraised value (you can’t borrow more than the property supports)
• program structure (see financing note below)
• 
  

Financing note: USDA allows financing up to 100% of the appraised value, and the upfront guarantee fee can typically be financed, creating “up to ~101%” financing in many cases.

5) Credit requirements (what USDA expects vs what lenders require)

USDA underwriting focuses on willingness and ability to repay. In practice:

• Many lenders use minimum score requirements of 580 though we have a lender that will go to a 580 score or better.
• Limited or “thin” credit may still be possible with strong documentation, but it’s more manual and case-specific.

6) Debt-to-income (DTI) and repayment ability

USDA looks at:

• total monthly debts (installments, credit cards, student loans, auto, etc.)
• proposed housing payment (principal + interest + taxes + insurance + any HOA)
• verified stable income and history
• 
  

If ratios are high, approval can still be possible with strong compensating factors (cash reserves, strong payment history, stable employment, etc.), depending on AUS/manual guidelines and the lender’s rules.

7) Eligible property types

Most commonly:

• Single-family homes
• Some condos (if approved/eligible)
• Some manufactured homes (must meet additional requirements)

The home must be safe, sound, and sanitary and meet appraisal and property standards.

8) Fees: USDA guarantee fees (upfront + annual)

USDA loans typically include:

• Upfront guarantee fee (commonly 1.00%) and
• Annual fee (commonly 0.35%), paid monthly as part of your payment

USDA publishes these by fiscal year and they can change. A USDA FY2026 notice confirms 1.00% upfront and 0.35% annual for that fiscal year.

Automatic Disqualifiers for USDA Loans

While every file is unique, these are common hard-stops that frequently make someone ineligible:

Property / program eligibility disqualifiers

• The home is not in a USDA-eligible area (address fails the map and/or USDA determination).
• The borrower won’t occupy the home as a primary residence.

Income disqualifiers

• Household income exceeds the USDA limit for that county and household size.

Legal / eligibility disqualifiers

• Borrower is not a U.S. Citizen / non-citizen national / Qualified Alien.
• In many cases: unresolved federal debt issues (example: CAIVRS-related hits) can block eligibility until cleared (handled through USDA/lender verification).

Credit / capacity disqualifiers (very common in practice)

• Recent serious delinquencies with no recovery pattern
• Repeated late housing payments
• Major derogatory credit that falls inside required waiting periods (bankruptcy/foreclosure timelines can vary by circumstances and lender overlays)
• Debt load that clearly fails repayment ability even with compensating factors

How the USDA Loan Process Works (Simple Step-by-Step)

1. Check property eligibility (address)
2. Check income eligibility (county + household size)
3. Pre-approval with a USDA-approved lender (income, assets, credit, debts reviewed)
4. Offer + contract
5. Underwriting + appraisal (USDA requirements verified)
6. USDA/Lender approval steps (lender submits for guarantee/commitment per process)
7. Closing (final numbers, funds, and keys)

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FAQ — USDA Home Loans

Does USDA mean “farm property”?

No. Most USDA-eligible homes are in rural/suburban areas—many are near growing towns.

Do I need to be a first-time homebuyer?

Not necessarily. USDA can work for repeat buyers too, as long as you meet eligibility and occupancy rules.

Can I use a USDA loan to buy a fixer-upper?

USDA generally expects the home to be move-in ready and meet property standards. Major renovation projects are typically better suited to renovation financing.

How do income limits work?

USDA uses household income and compares it to the limit for that county and household size. Use the official tool to screen it quickly.

Are there loan limits like FHA?

Not in the same way. USDA is usually limited by repayment ability and appraised value, not a published county loan-limit chart.

Can the seller pay closing costs?

Often yes, within program limits for interested party contributions, usually up to 6% of the purchase price.

(Your contract strategy matters: concessions must fit the appraisal and underwriting.)

What’s included in my monthly USDA payment?

Typically:

• Principal & interest
• Property taxes
• Homeowners insurance
• USDA annual fee (paid monthly)
• HOA (if applicable)

Is the USDA eligibility map guaranteed accurate?

USDA notes the map is a helpful tool, but final determination is made by USDA after a complete application is received.

USDA guidelines can change, and lenders may have additional requirements (“overlays”). This page is for educational purposes and is not a loan approval or a commitment to lend. Final eligibility is determined by USDA and the approved lender based on a complete application and documentation.