{"id":319344,"date":"2025-12-21T23:07:37","date_gmt":"2025-12-22T04:07:37","guid":{"rendered":"https:\/\/www.houzeo.com\/blog\/?p=319344"},"modified":"2026-01-29T05:26:11","modified_gmt":"2026-01-29T10:26:11","slug":"usda-loans","status":"publish","type":"post","link":"https:\/\/www.houzeo.com\/blog\/usda-loans\/","title":{"rendered":"USDA Loans: What You Should Know Before You Apply"},"content":{"rendered":"\n<p class=\"highlight\"><a    href=\"https:\/\/www.census.gov\/library\/stories\/2017\/08\/rural-america.html#:~:text=Conversely%2C%2097%20percent%20of%20the,Census%20Bureau%20%2D%20Opens%20as%20PDF.\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">97%<\/a> of the land in the United States qualifies as \u2018rural\u2019. Thanks to USDA loans, you have an affordable option to fulfil your dream of peaceful country living.<\/p>\n\n\n\n<p>The US Department of Agriculture offers USDA loans to make rural homeownership affordable for low to moderate-income buyers.&nbsp;These loans come with low interest rates and 0 down payment.<\/p>\n\n\n\n<p>If you decide that the USDA loan is for you, you should get pre-approved to understand your total costs. Why wait? Start your home buying journey today!<\/p>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"What-is-a-USDA-Loan\"><strong>What Is a USDA Loan?<\/strong><\/h2>\n\n\n\n<p>A USDA loan is a <a    href=\"https:\/\/www.houzeo.com\/blog\/what-is-a-mortgage\/\" target=\"_blank\" rel=\"noreferrer noopener\">mortgage<\/a> available to low-income borrowers who want to buy a house in rural areas of the US. It allows you up to 100% financing on a new home. USDA loans typically come as 30-year <a    href=\"https:\/\/www.houzeo.com\/blog\/fixed-rate-mortgage\/\" target=\"_blank\" rel=\"noreferrer noopener\">fixed rate mortgages<\/a>.<\/p>\n\n\n\n<p>The USDA strictly limits the loan to properties within the eligible rural areas. A town is only classified as &#8216;rural&#8217; if it has fewer than <a    href=\"https:\/\/www.ers.usda.gov\/topics\/rural-economy-population\/rural-classifications\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">5,000<\/a> people. The USDA periodically assesses these classifications.<\/p>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"Eligibility-Requirements\"><strong>What Are the Requirements?<\/strong><\/h2>\n\n\n\n<p>The eligibility for a USDA loan is as follows:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Location: <\/strong>The property must be located in a USDA-designated rural area. You can use the&nbsp;<a    href=\"https:\/\/eligibility.sc.egov.usda.gov\/eligibility\/welcomeaction.do?pageaction=sfp\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">USDA loan\u2019s eligibility map<\/a>&nbsp;to check if your home qualifies.<\/li><li><strong>Occupancy:<\/strong> The property you purchase must be your <a    href=\"https:\/\/www.houzeo.com\/blog\/primary-residence\/\" target=\"_blank\" rel=\"noreferrer noopener\">primary residence<\/a>. The USDA loan cannot be used to buy an additional home or <a    href=\"https:\/\/www.houzeo.com\/blog\/investment-property\/\" target=\"_blank\" rel=\"noreferrer noopener\">investment property<\/a>.<\/li><li><strong>Income: <\/strong>Your household income should be less than or equal to 115% of your area\u2019s median income.<\/li><li><strong>Credit Score: <\/strong>Lenders generally require a <a    href=\"https:\/\/www.houzeo.com\/blog\/what-credit-score-is-needed-to-buy-a-house\/\" target=\"_blank\" rel=\"noreferrer noopener\">credit score<\/a> of 640 or higher.<\/li><li><strong>Debt-to-Income Ratio:<\/strong>&nbsp;You must have a&nbsp;<a    href=\"https:\/\/www.houzeo.com\/blog\/debt-to-income-ratio\/\" target=\"_blank\" rel=\"noreferrer noopener\">debt-to-income ratio<\/a>&nbsp;of 41% or less.<\/li><li><strong>Employment:<\/strong>&nbsp;You must have a stable income and employment history.<\/li><li><strong>Citizenship:<\/strong>&nbsp;USDA loans are available to US residents, non-citizen nationals, as well as permanent resident aliens.<\/li><\/ul>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"Types-of-USDA-Loans\"><strong>Types of USDA Loans<\/strong><\/h2>\n\n\n\n<p>The US Department of Agriculture offers 3 types of loan programs for people who wish to purchase a rural home:<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Direct Loans:<\/strong>&nbsp;The USDA directly issues these loans. They are offered at subsidized&nbsp;<a    href=\"https:\/\/www.houzeo.com\/blog\/principal-and-interest\/\" target=\"_blank\" rel=\"noreferrer noopener\">interest rates<\/a>, and have no&nbsp;<a    href=\"https:\/\/www.houzeo.com\/blog\/mortgage-insurance\/\" target=\"_blank\" rel=\"noreferrer noopener\">mortgage insurance<\/a>.<\/li><li><strong>Guaranteed Loans:<\/strong>&nbsp;These are loans issued by private&nbsp;<a    href=\"https:\/\/www.houzeo.com\/pros\/mortgage-lenders-near-me\" target=\"_blank\" rel=\"noreferrer noopener\">mortgage lenders<\/a>&nbsp;and backed by the USDA. They require an upfront guarantee fee and an annual fee.<\/li><li><strong>Repair Loans and Grants:<\/strong>&nbsp;You can use these loans to&nbsp;make necessary repairs&nbsp;to an existing home.<\/li><\/ol>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"How-Much-Do-You-Need-to-Pay-for-a-USDA-Loan\"><strong>How Much Do You Need to Pay for a USDA Loan?<\/strong><\/h2>\n\n\n\n<p>There are 2 fees applicable for a USDA home loan:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Guarantee Fee:<\/strong>&nbsp;This upfront fee is 1% of the loan amount. It is typically paid at closing.<\/li><li><strong>Annual Fee:<\/strong>&nbsp;This fee is 0.35% of the loan amount. It is part of your monthly mortgage payment.<\/li><\/ul>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"Pros-and-Cons\"><strong>Pros and Cons<\/strong> <strong>of USDA Loans<\/strong><\/h2>\n\n\n\n<p>Carefully consider the advantages and disadvantages of a USDA loan before you apply for one:<\/p>\n\n\n\n<h3 class=\"margin-top-15 wp-block-heading\">\u2705 <strong>Pros<\/strong> <\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Affordable Mortgage Rates:<\/strong>&nbsp;USDA loans offer some of the lowest interest rates on the market.<\/li><li><strong>No Down Payment:<\/strong> They demand no down payment, while other loan types require a minimum of 3%.<\/li><li><strong>Full Funding:<\/strong> You can finance 100% of your home&#8217;s purchase price with a USDA loan.<\/li><li><strong>No Private Mortgage Insurance:<\/strong> USDA loans do not require <a    href=\"https:\/\/www.houzeo.com\/blog\/what-is-pmi\/\" target=\"_blank\" rel=\"noreferrer noopener\">private mortgage insurance<\/a>. This can significantly reduce your monthly&nbsp;mortgage payments.<\/li><li><strong>Inclusivity:<\/strong> USDA loans are not restricted to first-time home buyers.<\/li><\/ul>\n\n\n\n<h3 class=\"margin-top-15 wp-block-heading\">\u274c <strong>Cons<\/strong> <\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Geographic Restrictions:<\/strong> USDA loans are only available in designated rural areas. <\/li><li><strong>Income Limits:<\/strong> You can only avail this loan if you fall within a certain income bracket. This is because the USDA aims to support low-income families.<\/li><li><strong>Limited Funding:<\/strong> Since these loans operate within an annual budget, there is a chance your loan application may not be accepted.<\/li><li><strong>Additional Fees:<\/strong>&nbsp;You may have to pay guarantee fees, annual fees, and other costs in addition to your overall loan expenses.<\/li><li><strong>Occupancy:<\/strong> You can only take out a USDA loan for your primary residence.<\/li><\/ul>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"USDA-vs-Conventional\"><strong>USDA Loan vs. Conventional Loan<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>USDA Loan&nbsp;<\/strong><\/td><td><strong>Conventional Loan<\/strong><\/td><\/tr><tr><td>Backed by the federal government.<\/td><td>Not part of a government program.<\/td><\/tr><tr><td>Only allows property purchase in designated rural areas.<\/td><td>More flexibility in terms of property location.<\/td><\/tr><tr><td>Interest rates are relatively low.<\/td><td>Interest rates depend on market conditions and borrower qualifications.<\/td><\/tr><tr><td>Requires 0 down payment.<\/td><td>Requires 3% to 20% down payment.<\/td><\/tr><tr><td>Strict income limits based on the size and location of your home.<\/td><td>No income limits. But lenders typically consider debt-to-income ratio and employment stability.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"Should-You-Get-a-USDA-Loan\"><strong>Should You Get a USDA Loan?<\/strong><\/h2>\n\n\n\n<p>USDA loans make rural homeownership possible for low-income applicants. They come with low interest rates and 0 down payment. <\/p>\n\n\n\n<p>However, they also have income and geographic restrictions. So, make sure to assess all the eligibility requirements before you apply for a USDA loan.<\/p>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\"><strong>Find Your New Home With Houzeo<\/strong><\/h2>\n\n\n\n<p>With thousands of property listings, <a    href=\"https:\/\/www.houzeo.com\" target=\"_blank\" rel=\"noreferrer noopener\">Houzeo<\/a> is one of the biggest property listing sites in the US. You can find condos, townhouses, co-ops, and other types of <a    href=\"https:\/\/www.houzeo.com\/homes-for-sale\" target=\"_blank\" rel=\"noreferrer noopener\">homes for sale<\/a> on Houzeo.<\/p>\n\n\n\n<p class=\"margin-top-15\"><strong>\u00bb NEED MORE CLARITY?&nbsp;<\/strong>Read these exclusive&nbsp;<a    href=\"https:\/\/www.realestatequeen.com\/houzeo-reviews\/\" target=\"_blank\" rel=\"noreferrer noopener\">Houzeo reviews<\/a>&nbsp;and learn why the platform is the best in America\u2019s competitive housing market.<\/p>\n\n\n\n<h2 class=\"margin-top-28 wp-block-heading\" id=\"faqs\"><strong>Frequently Asked Questions<\/strong><\/h2>\n\n\n\t\t<div class=\"wp-faq-schema-wrap wp-faq-schema-accordion\">\n\t\t\t\t\t\t<div class=\"wp-faq-schema-items\">\n\t\t\t\t\t\t\t\t\t<p class=\"ui-accordion-header\">\n\t\t\t\t\t\tDo you need to be a farmer to qualify for a USDA loan?\t\t\t\t\t\t<span class=\"ui-accordion-header-icon ui-icon ui-icon-triangle-1-s\"><\/span>\n\t\t\t\t\t<\/p>\n\t\t\t\t\t<div class=\"ui-accordion-content\">\n\t\t\t\t\t\t<p>No, you do not need to be engaged in active farming to be eligible for a <a href=\"#What-is-a-USDA-Loan?\">USDA loan<\/a>. But the loan can be used to purchase a farm in a designated rural area.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<p class=\"ui-accordion-header\">\n\t\t\t\t\t\tCan I get a USDA loan after bankruptcy?\t\t\t\t\t\t<span class=\"ui-accordion-header-icon ui-icon ui-icon-triangle-1-s\"><\/span>\n\t\t\t\t\t<\/p>\n\t\t\t\t\t<div class=\"ui-accordion-content\">\n\t\t\t\t\t\t<p>Yes. But you will only be eligible for a USDA loan three years after a chapter 7 <a href=\"https:\/\/www.houzeo.com\/blog\/can-you-buy-a-house-after-bankruptcy\/\" target=\"_blank\" rel=\"noreferrer noopener\">bankruptcy<\/a> discharge.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<p class=\"ui-accordion-header\">\n\t\t\t\t\t\tDo USDA home loans have PMI?\t\t\t\t\t\t<span class=\"ui-accordion-header-icon ui-icon ui-icon-triangle-1-s\"><\/span>\n\t\t\t\t\t<\/p>\n\t\t\t\t\t<div class=\"ui-accordion-content\">\n\t\t\t\t\t\t<p>No, USDA loans do not require <a href=\"https:\/\/www.houzeo.com\/blog\/what-is-pmi\/\" target=\"_blank\" rel=\"noreferrer noopener\">private mortgage insurance (PMI)<\/a>. However, they have guarantee and annual fees that make up a small fraction of the loan amount.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<div class=\"new-excerpt\"><p class=\"small-desc\">USDA loans are government-backed mortgages that offer 100% financing, competitive interest rates, and flexible underwriting standards for eligible borrowers in rural and suburban...<\/p><\/div><div class=\"reading_date\"><span class=\"readtime\">5 mins read<\/span><span class=\"date\">Dec 21, 2025<\/span><\/div>","protected":false},"author":218,"featured_media":428139,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46225,46241],"tags":[24301,24272,24271,24304,24300,24275],"class_list":["post-319344","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buyer","category-mortgage-types","tag-fda-house-loan","tag-rural-home-loans","tag-rural-housing-loan","tag-usda-loan-qualifications","tag-usda-loans-rates","tag-usdaloans"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>USDA Loans: What You Should Know Before You Apply<\/title>\n<meta name=\"description\" content=\"The United States Department of Agriculture provides affordable USDA loans to low-to-medium income individuals for rural homeownership.\" \/>\n<meta name=\"robots\" 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