Understanding USDA Loans: Eligibility and Requirements Explained
USDA loans are government-backed mortgages for rural homebuyers with moderate incomes. They have property location requirements and specific income limits, setting them apart from other home loan options.
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Reviewed by Timothy Manni
TM
Mortgage & Real Estate Consultant
Tim Manni is a mortgage and real estate consultant for MoneyGeek with over 14 years of industry experience. He has led home and mortgage content teams on multiple personal finance websites, featuring his work on Yahoo Finance, CNBC, U.S. News & World Report, USA Today and more. Manni has a Bachelor of Arts in American Studies and Journalism from the West Chester University of Pennsylvania.
Edited by Jonathan RamosJonathan Ramos is an editor committed to producing user-friendly and accessible financial content, particularly for those in younger generations. Previously, he worked as a fact-checker at The Daily Emerald, the University of Oregon newspaper. Jonathan's interest in the personal finance space stems from his desire to make a positive impact on the lives of others — he helps people make informed financial decisions by using his editing skills to make complex information more digestible.
Contributions by 2 experts
TM
Reviewed by Timothy Manni
TM
Mortgage & Real Estate Consultant
Tim Manni is a mortgage and real estate consultant for MoneyGeek with over 14 years of industry experience. He has led home and mortgage content teams on multiple personal finance websites, featuring his work on Yahoo Finance, CNBC, U.S. News & World Report, USA Today and more. Manni has a Bachelor of Arts in American Studies and Journalism from the West Chester University of Pennsylvania.
Edited by Jonathan RamosJonathan Ramos is an editor committed to producing user-friendly and accessible financial content, particularly for those in younger generations. Previously, he worked as a fact-checker at The Daily Emerald, the University of Oregon newspaper. Jonathan's interest in the personal finance space stems from his desire to make a positive impact on the lives of others — he helps people make informed financial decisions by using his editing skills to make complex information more digestible.
Contributions by 2 expertsUpdated: May 10, 2024
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USDA home loans offer an affordable path to homeownership with minimal to no down payment, tailored for eligible rural and suburban homebuyers. Unlike conventional mortgages, these government-backed loans have below-market interest rates and reduced fees, making them an attractive option for purchasing, renovating or refinancing a home.
USDA loans offer low-interest and no down payment options for rural homebuyers, which makes them different from FHA or VA loans.
There are three USDA loan types: Guaranteed, Direct and Home Improvement Loans and Grants.
Common USDA loan requirements include U.S. citizenship, location eligibility and income limits, among other things.
A USDA mortgage loan is designed to foster homeownership in less densely populated rural and suburban areas. These government-backed loans offer borrowers benefits like lower interest rates and a streamlined approval process. They target low-to-moderate-income families, enabling many to buy homes with zero down payment and lower overall costs.
USDA loans require approval from USDA-qualified lenders and are primarily influenced by the borrower’s income and debt-to-income ratios to ensure affordable repayments. Fixed-rate terms generally range from 15 to 30 years. However, if your income increases and exceeds the program’s threshold, you may need to refinance your mortgage into another loan type.
USDA loans come in three types. Understanding their differences allows you to choose the right loan for your situation. Our table guides you through the specifics of each one.
