USDA loans (zero-down mortgages for eligible areas)
Reviewed by the Editorial Team · Updated October 18, 2026 · 9 min read
A USDA loan is a mortgage from an approved private lender with a federal guarantee behind it, offered with no down payment on homes in USDA-eligible areas. Two tests decide who qualifies: where the home sits, and how much your whole household earns.
Key takeaways
A USDA guaranteed loan finances 100% of the price in eligible areas and charges a 1% upfront fee plus 0.35% a year instead of PMI.
Household income must stay under the area cap, $122,800 for 1–4 people in most areas, and adults who are not on the loan still count.
On a $300,000 home, USDA runs $2,075 a month at 6.86% against $2,071 for FHA, which asks $10,500 down.
The annual fee lasts the life of the loan, and most lenders want a score of 640 or higher for automated approval.
Down payment
0% in eligible areas
Fees instead of PMI
1% upfront + 0.35% a year
Income cap
115% of area median
Credit score
640 for automated approval
USDA 30-year average6.86%Optimal Blue OBMMI · Nov 5, 2026.
$300,000 home, 0% down$2,075/moPrincipal, interest and the annual fee. USDA vs FHA ↓
How a USDA loan works
A USDA guaranteed loan is a mortgage from an approved private lender, backed by a U.S. Department of Agriculture guarantee against default losses. That backing is what lets lenders finance 100% of the price in the areas the program designates.
Down payment: none required if you meet the rules
Location: the home must sit in a USDA-eligible area
Income: total household income must stay under an area cap
Occupancy: the home must be your primary residence
Eligible areas include many small towns and outer suburbs, not only farmland, so check the address instead of guessing from the neighborhood. County caps are listed in our USDA income limits reference.
How much you can borrow
USDA sets no maximum loan amount for guaranteed loans. The ceiling comes from the household income cap and from what the lender decides you can repay, so steadier income and lower debts allow a larger loan.
Guaranteed loans vs. direct loans
This guide covers the guaranteed program, where most buyers start. USDA's Section 502 direct program is separate, with its own income limits and its own application.
Two USDA home loan programs
Guaranteed loans vs. direct loans
Guaranteed loan (this guide)
Direct loan (Section 502)
Who lends
An approved private lender
USDA itself
Who it serves
Households up to 115% of area median income
Low and very low income households
How you apply
Through a USDA-approved lender
Through USDA Rural Development
What a USDA loan really costs
Take a $300,000 home, with USDA at 6.86% and FHA at 6.89%, the average rates as of Nov 5, 2026 (the USDA rates page tracks the latest). USDA finances its 1% upfront fee into a $303,000 loan with nothing down, while FHA asks for $10,500 down.
Worked exampleA $300,000 home: USDA with no down payment vs FHA with 3.5% down
What a USDA loan really costs
Loan
Cash down
Rate
P&I
Fee / MIPper month
Monthly
USDA, 0% down
$0
6.86%
$1,987 on $303,000
$88 0.35% annual fee
$2,075
FHA, 3.5% down
$10,500
6.89%
$1,938 on $294,566
$133 0.55% MIP
$2,071
Cash saved at closing with USDA$10,500the FHA down payment you keep — closing costs still apply
Monthly difference+$4USDA vs FHA each month (USDA higher) — both fees last the life of the loan
Rates: Optimal Blue OBMMI 30-year averages — USDA 6.86%, FHA 6.89% (Nov 5, 2026). USDA loan includes the 1% upfront guarantee fee financed; FHA includes the 1.75% upfront MIP. First-year annual fee and MIP shown. USDA also requires an eligible area and household income within the limit. Run the USDA calculator
On those inputs the USDA payment is $1,987 of principal and interest plus $88 for the annual fee, or $2,075 in all. FHA totals $2,071, so USDA's monthly payment is $4 more than FHA's.
The monthly payments land close together; the real gap is cash at closing. USDA lets you keep the $10,500 that FHA asks for as a down payment, though closing costs apply to both and each product's fee runs for the life of the loan.
The annual fee never cancels
Conventional PMI can be removed once your equity builds; the USDA annual fee cannot. It is charged on the scheduled loan balance, so it eases slowly as you pay down, but it ends only when the loan does, by payoff or refinance.
Costs the monthly payment doesn't show
The monthly figure leaves out four charges. Each belongs on your loan estimate, so compare them lender by lender:
Upfront fee: 1%, or $3,000 on the $300,000 home, added to the balance
Annual fee: 0.35% a year, billed monthly, for the life of the loan
Closing costs:appraisal, title and lender charges still apply
Repairs: the home must meet USDA condition standards at appraisal
When a USDA loan goes wrong
USDA problems rarely come from the rate. They come from eligibility rules outside your control and from a fee that never ends. These are the points to check before you fall for a house:
Household income: adults not on the loan still count toward the cap
Map changes: an eligible town can drop out when USDA updates its maps
Lifelong fee: the annual fee has no cancellation point
Occupancy: primary residence only, and owning adequate housing nearby generally rules you out
USDA's guidance for lenders counts income from every adult in the household toward the limit, while repayment income comes only from the people who sign the note. A working relative can push you over the cap without helping you qualify.
Check before you tour homes
Run the address through USDA's eligibility tool and add up income for every adult living in the home, borrower or not. If the total comes close to your county's limit, get a lender's pre-approval before you make an offer.
USDA vs. FHA, VA and a 3%-down conventional loan
All four can get you into a home with little cash, but they differ in who qualifies, what the fee or insurance costs and how long it lasts.
Four low-down-payment mortgages side by side
USDA vs. FHA, VA and a 3%-down conventional loan
USDA
FHA
VA
Conventional, 3% down
Down payment
None
3.5% minimum
None
3% minimum
Upfront fee
1% guarantee fee, financed
1.75% premium, financed
2.15% funding fee, first use, no down payment
Usually none
Ongoing fee or insurance
0.35% a year, for the life of the loan
0.55% a year, for life at 3.5% down
None; no monthly mortgage insurance
PMI at 0.46%–1.5% a year, removable
Income limit
Yes: 115% of area median
None
None
None on standard loans; some 3% programs cap it
Location rule
Eligible area on USDA's map
None
None
None
Fits best
Eligible area, income under the cap, little cash
Lower scores, any location
Veterans and service members, any location
Good credit, any location, insurance that ends
FHA is the usual fallback when a home sits outside the USDA map or income runs over the cap, and VA is worth checking first if you served. The FHA loan guide covers that program in full.
Who a USDA loan fits
A USDA loan fits buyers who want little cash at closing, are open to a small town or outer suburb, and have household income comfortably under the area cap.
Buyers short on cash for an FHA or conventional down payment
Households whose total income sits under the area cap
Homes in small towns and outer suburbs on the USDA map
Steady earners with a score near or above 640
Skip it if the home you want sits outside the eligible map, your household earns above the cap, or you want an investment property. With 20% down, a conventional loan avoids both USDA fees and carries no mortgage insurance at all.
USDA loans: pros and cons
Pros
No down payment in eligible areas
Annual fee runs below FHA's insurance premium
No USDA-set maximum loan amount
Open to repeat buyers, not only first-timers
Cons
Home must sit in a mapped eligible area
Household income, non-borrowers included, is capped
Annual fee lasts the life of the loan
Primary residence only, never an investment property
What USDA lenders look for
Most lenders want a credit score of 640 or higher, the level that typically qualifies for USDA's automated approval. A lower score may still be approved through manual underwriting, which usually demands a stronger overall file.
Lenders also look for stable income, total debt payments near 41% of income or lower, and a home that appraises at value and meets USDA condition standards. Minimums for every program are compared in the credit score reference.
Requirements at a glance
Home in a USDA-eligible area, confirmed on USDA's property map
Household income at or under the area limit, $122,800 for 1–4 people in most areas
Credit score of 640 or higher for automated approval, manual review below
Total debt-to-income ratio near 41% or lower at most lenders
Primary residence, not an investment property or second home
Home that meets USDA condition standards at appraisal
In most areas the limit is $122,800 for households of one to four people and $162,100 for five to eight, set at 115% of area median income. Costly counties have higher limits.
The cap counts every adult's income, so confirm your county on USDA's eligibility tool before you shop.
Which is better, FHA or USDA?
USDA is better when the home is in an eligible area and income is under the cap; FHA fits when either test fails.
On a $300,000 home, USDA's monthly payment is $4 more than FHA's, at $2,075 against $2,071, and you skip the $10,500 FHA down payment. Both fees last the life of the loan.
Do USDA loans require tax returns?
Often. Lenders must verify your income, and USDA eligibility counts income from everyone in the household, so expect to document it.
The exact documents vary by lender and income type, and self-employed borrowers are usually asked for tax returns, so request your lender's checklist before you apply.
What disqualifies you for a USDA loan?
The usual reasons are household income over the area limit, a property outside an eligible area, and a home you won't live in as your primary residence. A score under 640 also blocks automated approval, though manual underwriting may still be possible. Debts the lender judges unaffordable can end an application too.
Are USDA loans only for rural areas?
No. Eligible areas include many small towns and outer suburbs, not only farmland, and USDA's map decides eligibility rather than how rural a place feels.
Check the exact address with USDA's property eligibility tool, because the maps are updated and addresses a street apart can land on opposite sides of the line.
Does a USDA loan have PMI?
No. USDA loans charge a guarantee fee instead of private mortgage insurance: 1% upfront, usually financed into the loan, plus 0.35% a year billed monthly.
Unlike PMI, the annual fee does not drop off when your equity grows, so it lasts for the life of the loan.
Is there a maximum USDA loan amount?
No. USDA sets no loan limit for guaranteed loans. The practical cap comes from the household income limit and from what the lender decides you can repay based on your income, debts and credit.
Lenders can add their own limits, and the upfront fee is added on top of the amount you finance.
What's the difference between USDA guaranteed and direct loans?
A guaranteed loan comes from a private lender with a USDA guarantee and serves households up to 115% of area median income. A direct loan, called Section 502, is made by USDA itself for low and very low income households. Most buyers use guaranteed loans, which is the program this guide covers.
What credit score do you need for a USDA loan?
Most lenders want 640 or higher, the level that typically qualifies for USDA's automated approval. Below that, a lender may still approve the loan through manual underwriting, usually with a stronger overall file and extra documentation.
Lenders set their own minimums, so the cutoff varies from one lender to the next.
Is a USDA loan only for first-time buyers?
No. Repeat buyers qualify, since the rules turn on the property's location, your household income and living there as your primary residence.
USDA generally is not meant for buyers who already own adequate housing nearby, so ask a lender how your current home would be treated before you apply.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
Nothing matches that. Try “refinance”, “FHA”, “Texas”, “Rocket” or “PMI”.