USDA Loan
A USDA loan is a government-backed mortgage issued by the U.S. Department of Agriculture for buyers in eligible rural and suburban areas. USDA loans offer 100% financing (no down payment required) and below-market interest rates, with income limits that ensure the program serves low-to-moderate income borrowers.
Despite the 'agricultural' name, USDA loans are available in many suburban and small-town areas—not just farms. About 97% of U.S. land area is USDA-eligible, covering 109 million people. You can check property eligibility at the USDA's online eligibility map. Income limits apply: for most areas in 2024, household income cannot exceed 115% of the area median income (AMI). For a family of four in many markets, this means incomes up to $110,000–$140,000 qualify.
There are two USDA loan programs. The Guaranteed Loan Program (through approved lenders) allows up to 100% LTV for moderate-income borrowers and is the most commonly used. The Direct Loan Program (through USDA directly) serves very low-income borrowers with interest rates as low as 1% through payment subsidies.
USDA loans require a 1% upfront guarantee fee and a 0.35% annual fee (both lower than FHA MIP). With a 640+ credit score, USDA loans use streamlined underwriting. The no-down-payment feature is the program's headline benefit, but eligibility requirements—income limits, property location, primary residence only—mean it doesn't work for everyone.
Key Takeaway
A USDA loan is a government-backed mortgage issued by the U.S. Department of Agriculture for buyers in eligible rural and suburban areas. USDA loans offer 100% financing (no down payment required) and below-market interest rates, with income limits that ensure the program serves low-to-moderate income borrowers.
Related Terms
Frequently Asked Questions
Check the USDA's Property Eligibility Map at eligibility.sc.egov.usda.gov. Many suburban and small-town areas qualify. Enter the address to see an instant eligibility determination.
Income limits vary by county and household size—generally 115% of area median income. Check the USDA's income eligibility calculator online for your specific county. Most moderate-income families in rural and suburban areas qualify.
No. USDA loans are strictly for primary residences in eligible areas. You cannot use a USDA loan for a vacation home, rental property, or second home.
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