USDA Loans

A USDA loan is a zero-down-payment mortgage guaranteed by the U.S. Department of Agriculture for homes in eligible rural and suburban areas. Despite the name, it has nothing to do with farming. It finances ordinary homes in the large swaths of the country the USDA designates as rural, which include many exurbs and small towns within commuting distance of major cities. For moderate-income buyers in eligible areas, it’s the only widely available $0-down program that doesn’t require military service.

How a USDA loan works

Formally the “USDA Rural Development Guaranteed Housing Loan,” the program works like other government-backed mortgages: private lenders make the loan, and the USDA guarantees it, absorbing risk so lenders can offer 100% financing at competitive rates. (The USDA also runs a separate “Direct” program for low-income borrowers through its own offices; this page covers the Guaranteed program available through lenders.)

Two eligibility maps govern everything:

The property map. The home must be in a USDA-eligible area. The maps are more generous than “rural” suggests: roughly 90%+ of U.S. land area qualifies, including towns and townships surrounding many metros. Eligibility is checked by exact address.
The income ceiling. Total household income must fall at or below the limit for your county and household size, set at 115% of area median income. For 2026, that’s roughly $112,450 for a 1-4 person household in most areas and about $148,450 for 5-8 person households, with higher limits in higher-cost counties. Critically, this counts income from all adults in the household, whether or not they’re on the loan.

USDA loans are 30-year fixed-rate loans for primary residences only.

Who qualifies

Location: the property must be in a USDA-eligible area (verified by address lookup; never assume either way)
Household income at or below the county limit: approximately $112,450 for 1-4 person households in most areas as of 2026, subject to annual change
Credit score of 640+ for streamlined automated approval; lower scores can sometimes qualify with manual underwriting and clean recent history
Debt-to-income ratios generally around 29% housing / 41% total by guideline, with flexibility through automated underwriting for stronger files
Stable, documented income, typically two years of history
U.S. citizenship or eligible noncitizen status, and the home must be your primary residence
The property must be a modest single-family home in sound condition: no income-producing farms, and generally no in-ground-pool-driven luxury outliers

What it costs

Interest rate. Competitive with FHA and VA, since government backing keeps USDA pricing tight.
Upfront guarantee fee: 1% of the loan amount, almost always financed into the loan (fees as of 2026, subject to change by program year).
Annual fee: 0.35% of the loan balance, paid monthly. This is USDA’s version of mortgage insurance, and it’s cheaper than FHA’s roughly 0.55% MIP or typical PMI at low down payments. It runs for the life of the loan, though the dollar amount declines as the balance falls.
Closing costs. Normal 2–5% range. USDA allows sellers to contribute, and in a quirk unique to the program, closing costs can sometimes be financed into the loan when the home appraises above the purchase price.

Model a zero-down USDA payment against FHA and conventional alternatives in our calculator suite.

Pros and cons

Pros:

$0 down payment, with no military service required
The cheapest mortgage insurance of the major low-down programs (1% upfront / 0.35% annual)
Competitive fixed rates
Eligible areas are far broader than “rural” implies; many commutable towns qualify
Closing costs can sometimes be financed when the appraisal supports it

Cons:

Geographic restriction: homes in cities and dense suburbs are out
The household income ceiling counts every adult’s income, which disqualifies some two-earner families
Primary residences only, single-family only
The annual fee runs for the life of the loan (refinancing to conventional at 20% equity is the exit)
USDA’s final-commitment step can add days to a couple weeks to closing, depending on state office backlog
640-below credit requires manual underwriting, which fewer lenders handle

USDA vs. FHA and VA

Against FHA: if the property and your household income are eligible, USDA usually wins: 0% down versus 3.5%, and materially cheaper mortgage insurance. FHA’s advantages are geographic freedom, more forgiving credit below 640, and eligibility regardless of income.
Against VA: if you’re VA-eligible, VA generally wins, with no monthly insurance at all and no geographic or income restrictions. USDA is the zero-down path for everyone else.
Against conventional: conventional requires a down payment but has no location or income ceiling, and its PMI cancels at 20% equity. Buyers who outgrow the USDA income limit or want a home outside eligible areas land here.

Getting started with Priority Home Mortgage

USDA lending rewards local knowledge: knowing which townships around Grand Rapids, or around our branch markets in Florida, Colorado, Tennessee, and North Carolina, fall inside the eligibility lines, and what current state-office turn times mean for your contract dates. Priority Home Mortgage’s loan officers can check a property address and your household income against the 2026 limits in one conversation. Talk to a local loan officer, or start with our quick quote form and include the address you’re curious about. We’ll tell you quickly whether USDA is on the table.

USDA Loans: your questions, answered

Do I have to buy a farm to use a USDA loan?

No. This is the biggest misconception about the program. USDA loans finance ordinary single-family homes; the property just has to sit in a USDA-eligible area, and those maps cover most of the U.S. land area including many suburbs and exurbs of mid-size cities. Income-producing farms actually don't qualify.

How do I know if a property is in a USDA-eligible area?

The USDA publishes an address-lookup map on its eligibility website, and any loan officer can check an address in seconds. Areas just outside city limits are often eligible even when they feel suburban. In West Michigan, for example, much of the territory beyond the immediate Grand Rapids metro qualifies. Always check the specific address; eligibility lines can run down the middle of a road.

What income counts toward the USDA limit?

All income from every adult in the household, not just the people on the loan. That includes a working spouse who isn't a borrower, and it's the program's most common tripwire. The limit in most areas for 2026 is about $112,450 for a 1-4 person household (about $148,450 for 5-8), with higher limits in higher-cost counties.

Is the USDA guarantee fee the same as PMI?

It plays a similar role but costs much less. USDA charges 1% upfront (usually financed into the loan) and an annual fee of 0.35% of the balance, paid monthly. For comparison, FHA charges 1.75% upfront and roughly 0.55% annually, so USDA's insurance cost is among the cheapest of any low-down-payment program.

Can I make too little to qualify for a USDA loan?

You need enough documented, stable income to carry the payment under normal underwriting; the income limit is a ceiling, not a floor. USDA also offers a separate Direct loan program through its own offices for low-income borrowers; the guaranteed program described here, offered through lenders like us, serves moderate incomes.

Do USDA loans take longer to close?

Sometimes, by a bit. After the lender's underwriting, the file goes to the USDA for a final commitment, which can add days to a couple of weeks depending on the state office's backlog. A loan officer who does USDA volume will know the current turn times and set your purchase contract dates accordingly.