A USDA mortgage loan is a home purchase loan backed by the U.S. Department of Agriculture, designed for people buying homes in rural areas

The USDA does not lend money directly. Instead, banks and mortgage lenders issue loans that meet USDA standards, and the USDA guarantees a portion of the loan if you default. This may provide means lenders are willing to approve borrowers with lower credit scores, smaller down payments, or less savings than conventional mortgages require. The tradeoff is that your home must be in a USDA-designated rural area, and your household income cannot exceed a limit that varies by county.

The loan itself comes from a private lender — your bank, a mortgage company, or a credit union. You make monthly payments to that lender, not to the USDA. The USDA's role is to promise the lender that if you stop paying, the government will cover part of the loss. That promise is what makes the loan possible for borrowers who might not otherwise get approved.

Key Takeaways

  • USDA loans require zero down payment and allow credit scores as low as 580, though most lenders prefer 620 or higher.
  • Your home must sit in a USDA-designated rural area, which you can check using the USDA's online may be able to access map before you start house hunting.
  • Your household income must fall below a limit set by county — typically between $50,000 and $90,000 for a family of four, depending on location.
  • You pay a one-time may provide fee (usually 1 to 3.5 percent of the loan amount) and an annual fee (0.3 to 0.5 percent), both rolled into your monthly payment.
  • The property must be a single-family home you will occupy as your primary residence; investment properties and multi-unit buildings do not may have access to.

Where you can buy with a USDA loan

The USDA defines rural differently than most people do. A town of 20,000 people can be rural under USDA rules; a suburb of 50,000 can be excluded. The boundary depends on population density, distance from urban centers, and whether the area is designated as a commuting zone.

You can check whether a specific address qualifies by entering the street address into the USDA's Property may be able to access Map at rd.usda.gov. The map shows you immediately whether that property is in an may be able to access area. If the address does not appear in the system, the property does not may have access to. This is not negotiable — you cannot get a USDA loan for a home outside the mapped areas, even if the town feels rural to you.

Rural areas cover roughly 97 percent of U.S. land but only about 25 percent of the population. If you are buying in a major metropolitan area or its immediate suburbs, you almost certainly will not may have access to. If you are buying in a small town, a county seat, or exurban land, you probably will.

Income limits and household size

The USDA sets a maximum income for each county. If your household income exceeds that limit, you cannot use a USDA loan, regardless of your credit or down payment. The limit is based on the area's median income and varies widely — a family of four might have a $65,000 limit in one county and an $85,000 limit in another.

Income includes wages, self-employment earnings, Social Security, disability payments, child support, and rental income. It does not include one-time payments like insurance settlements or inheritances. If you are married and filing jointly, both spouses' income counts. If you are buying with a co-borrower who is not your spouse, their income counts too.

You can find the income limit for your county on the USDA website or by asking your lender. The limits are updated each year, usually in February. If your income is close to the limit, apply before the new year's limits take effect, because they sometimes go down.

Down payment and credit score requirements

USDA loans require zero down payment. You do not need to save 3 percent, 5 percent, or any amount. The lender finances 100 percent of the home's purchase price, which is why the USDA may provide is so valuable — without it, lenders would not take that risk.

Credit score requirements vary by lender. The USDA itself does not set a minimum, but most lenders want a score of 620 or higher. Some lenders will go as low as 580, and a few will consider scores in the 500s if you have compensating factors — steady employment, low debt, or savings. If your score is below 600, call several lenders and ask what their floor is; you may find one willing to work with you.

A lower credit score does not automatically disqualify you, but it may mean a higher interest rate. The lender is taking on more risk, so they charge you more to offset it. Shop around, because rates vary significantly between lenders even for the same borrower.

Fees you will pay

USDA loans carry two fees that conventional mortgages do not. The may provide fee is a one-time charge paid at closing, usually 1 to 3.5 percent of the loan amount. A $200,000 loan might carry a $2,000 to $7,000 may provide fee. This fee is not paid to the USDA; it goes to the lender as compensation for the risk they are taking.

The annual fee is charged every year and is typically 0.3 to 0.5 percent of the remaining loan balance. This fee is paid to the USDA to maintain the may provide. Both fees are usually rolled into your monthly mortgage payment, so you do not pay them upfront in cash — they are financed as part of the loan.

These fees add to your total cost compared to a conventional loan, but they are offset by the zero down payment and lower interest rates USDA loans often carry. A borrower with a 580 credit score might pay 1 to 2 percent more in interest on a conventional loan than on a USDA loan, which can outweigh the may provide fee over time.

What property types may have access to

The property must be a single-family home that you will occupy as your primary residence. Condos, townhouses, and multi-unit buildings do not may have access to. Mobile homes may have access to only if they are permanently affixed to the land and meet specific construction standards.

You cannot use a USDA loan to buy an investment property, a vacation home, or a second residence. The home must be where you actually live. If you buy a home with a USDA loan and then move away and rent it out, you are in violation of the loan terms, and the lender can demand repayment.

The home must also meet minimum property standards set by the USDA. It cannot have major structural damage, a leaking roof, unsafe electrical wiring, or other serious defects. The lender will order an appraisal and inspection to verify this. If the home fails inspection, you can ask the seller to make repairs before closing, or you can walk away.

How the application process works

You start by finding a lender who offers USDA loans. Not all banks do, so call ahead or check their website. Once you have chosen a lender, you will provide pay stubs, tax returns, bank statements, and employment verification. The lender will order a credit report and verify your income with your employer.

The lender will also order an appraisal to confirm the home's value and a property inspection to ensure it meets USDA standards. These typically take one to two weeks. Once the lender has all the information, they will issue a conditional approval or a denial. Conditional approval means you are approved pending final verification of employment and no new debt.

The entire process from application to closing usually takes 30 to 45 days. If you are buying in a competitive market, get pre-approved before you make an offer, so the seller knows you are a serious buyer.

Frequently Asked Questions

Can I use a USDA loan to buy a home in the city?

Only if the specific address is in a USDA-designated rural area. Most cities and their immediate suburbs are not may be able to access. Check the USDA Property may be able to access Map with the exact street address before you make an offer. If it is not on the map, a USDA loan will not work for that property.

What if my income is slightly over the limit?

You cannot use a USDA loan if your income exceeds the county limit. There is no exception process or appeal. If you are over by a small amount, wait until the next year's limits are published in February — they sometimes increase. Otherwise, you will need to look at conventional loans or FHA loans instead.

Do I have to buy through a real estate agent?

No. You can buy directly from a seller or through an agent. The USDA loan process is the same either way. The lender handles the verification and appraisal; the real estate agent (if you use one) handles the negotiation and paperwork on the sale itself.

Can I refinance a USDA loan later?

Yes. You can refinance into another USDA loan, a conventional loan, or an FHA loan. If you refinance into a conventional loan and your home is no longer in a rural area (because the area has been reclassified), that is fine — the restriction only applies at the time of the original purchase.

What happens if I cannot make a payment?

Contact your lender immediately. Many lenders offer forbearance, which temporarily reduces or pauses your payment. If you fall 60 days behind, the lender can begin foreclosure. The USDA may provide protects the lender, not you, so you are still responsible for the debt.