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USDA Loans: What Are They, and How Do I Get One?

What is a USDA Loan?

Simply put, a USDA loan allows affordable homeownership for low- and moderate-income families living in rural or suburban areas. This endeavor promotes prosperity, and more importantly, quality of life in areas that need it most.

USDA loans are also known as the USDA Rural Development Guaranteed Housing Loan Program by the U.S. Department of Agriculture.

How Does a USDA Loan Increase the Chances of Home Affordability?

There’s power in partnerships.
USDA loans are issued by the government, not your local bank. Your local lender is essentially a guide in the application process, and can answer questions along the way. This partnership allows the buyer flexibility to obtain a home without a down payment.

Because you aren’t offering a down payment, the government will most likely require you to pay mortgage insurance.

Do I Need to Have an Agricultural Occupation to Secure a USDA Loan?

You do not. Although the Department of Agriculture is the entity offering the loan, applicants don’t need to be employed by an agricultural entity. Your occupation doesn’t affect their final decision.

For example: A farmer and a graphic designer who live in the same area, bring in the same annual income, and use this income responsibly would have an equal opportunity at securing a USDA loan.

What are the Income Limits?

Income limitations are based on location.
To read more about income limitations, click here.
To read more about location eligibility, click here:

How Do I Qualify for a USDA Loan?

There are several conditions that are considered before your loan can be granted.

Home Size – USDA loans are typically offered to “approved applicants seeking adequate, modest, decent, safe, and sanitary dwellings as their primary residence.” Choosing a smaller home is a great way to build some confidence with your lender. They simply want to know that you’re capable of paying back the loan.

Home Location – The “where” matters here. You must live in a rural or suburban area. Since the U.S Department of Agriculture is the entity responsible for granting this homeownership opportunity, they don’t have the ability to extend this privilege to those living in metropolitan areas.

Household size – The more dependents living with you will help determine the income limit. For example, a two-person household income limit will be lower than a five-person household income limit.

Do I Need a Good Credit Score to Secure a USDA Loan?

You need to have a score of at least 620 to receive automatic approval from the USDA. Take a look at the current FICO® credit score ranges to see where you fit.

Are there Fees Associated with USDA Guaranteed Loans?

Yes, there are.
You’ll typically be charged an upfront fee, as well as monthly mortgage insurance. For more information on the current guarantee fee and additional loan fees, you can contact any Rural Development office.

So is a USDA Loan Right For Me?

If you live in a rural area, bring home a low-to-moderate income, and don’t currently have the down payment for a new home, a USDA loan might be an option. We suggest that you speak with a local lender who can help familiarize you with all the associated fees.

Still need more information on USDA loans?

Find out everything else there is to know (requirements, where to start, and much more) right here. Or if you want to talk USDA loans right now, we’ll be more than happy to speak with you.