Mortgage Rates
Refinance Rates
FHA Rates
VA Rates
Jumbo Rates
Adjustable Rate Mortgage Rates
Interest Only Mortgage Rates
Non-Owner Occupied Rates
Click to Close
Mortgage Rates
Refinance Rates
FHA Rates
VA Rates
Jumbo Rates
Adjustable Rate Mortgage Rates
Interest Only Mortgage Rates
Non-Owner Occupied Rates
Navigate Section
USDA Home Loan Program Overview

USDA Home Loan Program Overview

  • USDA Home Loan Key Considerations
  • Pros Cons
    • Ability to buy a home with zero down payment
    • Typically lower interest rates than FHA or conventional mortgage programs
    • Lower ongoing mortgage insurance premium than FHA or conventional mortgage programs
    • No loan limits
    • Property must be located in a USDA-designated rural area
    • Stricter borrower qualification requirements (lower debt-to-income ratio, higher credit score)
    • Maximum borrower income limits
    • Borrower is required to pay up-front (1.00% of mortgage amount) and ongoing (0.35% of mortgage amount) USDA mortgage insurance premium
  • USDA Home Loan Program Overview
  • The U.S. Department of Agriculture (USDA) Home Loan Program is designed to help individuals with low-to-moderate incomes obtain mortgages and buy homes located in rural areas or small communities with no down payment.  The program allows qualified borrowers to finance 100% of the property purchase price plus certain fees and expenses with a USDA-backed mortgage to purchase eligible properties located in USDA-designated rural areas.  The borrower does not need to be a first-time home buyer but the USDA Home Loan Program works well for individuals buying their first home.

    The USDA insures the mortgage which basically guarantees that the lender will recover the full amount of the mortgage in the event of foreclosure.  Because the loans are guaranteed by the USDA, borrowers typically pay lower interest rates as compared to the FHA Home Loan Program or conventional mortgages (loans not backed by the government).  To help offset the cost of the USDA guarantee, the borrower is required to pay up-front (1.00% of mortgage amount) and ongoing (0.35% of mortgage amount) USDA mortgage insurance fees, which are also called guarantee fees.

    There are two types of USDA Home Loan Programs:

    • USDA Guaranteed Loan Program: The most common type of USDA home loan, the Guaranteed Loan Program allows borrowers with low-to-moderate incomes to obtain mortgages through USDA-approved private sector lenders that are 90% guaranteed by the USDA / U.S. government. The USDA Guaranteed Loan Program offers borrowers 15 or 30 year fixed rate mortgages
    • USDA Direct Loan Program (Section 502 Program): For low and very low income individuals, the Direct Loan Program offers mortgage payment assistance to help borrowers make their mortgage payments for a specified period of time. Participants of the Direct Loan Program borrower money directly from the USDA and, including the payment assistance, can pay interest rates as low as 1%, depending on financial need. Additionally, the Direct Loan Program offers mortgage terms of 33 or 38 years depending on the borrower’s ability to afford his or her monthly mortgage payment -- the longer the mortgage term the lower the monthly payment. The USDA Direct Loan Program is for borrowers who are not able to arrange mortgage financing through other means. When borrower sell or move out of the property they required to repay the payment assistance received over the life of the mortgage.
  • CalculatorUse our USDA HOME LOAN QUALIFICATION CALCULATOR to determine what size USDA home loan you can afford
  • How the USDA Home Loan Program Works
  • Mortgages through the USDA Guaranteed Loan Program are provided by USDA-approved private sector lenders such as banks, mortgage banks and mortgage brokers.  The USDA does not endorse any particular lenders but offers a list of approved lenders as well as a list of USDA Guaranteed Loan Program local contacts on the USDA web site.  Mortgages for the USDA Direct Loan Program are provided directly by the USDA instead of a bank or other private sector mortgage lender. In many cases borrowers work with a local housing agency or other non-profit housing organization to apply for the USDA Direct Loan Program.  To learn more about and to apply for the USDA Direct Loan Program contact your USDA State Office.  Click on a lender below or INTEREST RATES to contact lenders about the USDA Guaranteed Loan Program.

    • NMLS
    Great! We sent your message to the lender!

    By clicking the "Request More Info" button you: (a) agree to our Terms of Use and Privacy Policy, and (b) consent to be contacted by this lender using the contact information provided by you through various means, such as an automated dialing system or pre-recorded voice messages, even if you are otherwise listed on a do not call or email registry or are charged for the call. Your consent is not required to receive services from this lender.

    Rate Details*
    Loan Program:  
    Monthly Payment:  
    APR:  
    Rate:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Compare Mortgage Rates
    • Lender
    • APR
    • Loan Type
    • Rate
    • Payment
    • Fees
    • Contact
    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • USDA Home Loan Program Property Eligibility
  • The property being mortgaged must meet the USDA Home Loan Program eligibility requirements including the following:

    • The property must be located within a USDA-designated rural area or small community.  In many cases these areas are located relatively close to major cities.  95% of the land in the U.S. representing a population of over 100 million people is considered USDA rural area.  You can use the  USDA's Property Eligibility Tool to determine if a property is located in a USDA-designated rural area.
    • The property must be in good condition.  An appraiser will review the property to determine its fair market value and verify that the it meets minimum quality standards.  The property must be the borrower’s primary residence. Vacation homes and rental properties are not eligible for the USDA Home Loan Program.  The property can be a new or existing residence.
    • The property must be a single-family residence such as a home, condominium, townhouse or modular home.  Multi-family properties are not eligible for the USDA Home Loan Program.  If you are buying a condominium, the condo project must be approved by HUD, the VA or Fannie Mae.

    For the USDA Direct Loan Program, additional property eligibility requirements include: the property size generally cannot exceed 1,800 square feet and the property cannot have in-ground swimming pool.

  • USDA Home Loan Program Borrower Eligibility
  • In order to qualify for the USDA Home Loan Program, the borrower must meet certain eligibility requirements including the following:

    • Be a U.S. citizen or a qualified non-citizen and be eligible to participate in programs offered by the federal government.
    • Show a track-record or willingness to pay bills on time.
    • No bankruptcy or foreclosure in the past three years and no delinquent accounts or accounts in collection.
  • USDA Home Loan Program Borrower Qualification Requirements
  • Borrowers must meet certain requirements to qualify for the USDA Home Loan Program . We review the key borrower qualification requirements below.

    Credit Score

    The USDA Home Loan Program typically requires that the borrower have a minimum credit score of 620 although there are some cases where borrowers can qualify for a USDA loan with a lower score.  We recommend that you review your credit score six months to a year before you start the mortgage process to address potential issues.

    Borrower Debt-to-Income Ratio

    USDA guidelines typically allow a borrower to spend a maximum of 29% of their monthly gross income on their mortgage payment and other housing-related expenses.  This is known as the front-end debt-to-income ratio, or the maximum percentage of a borrower's monthly gross income that can be spent on total monthly housing expense (MHE).  For example, if a borrower makes $4,000 per month in gross income, the borrower can spend $1,160 per month on his or her mortgage payment plus property tax, homeowners insurance, USDA mortgage insurance fees and other applicable housing-related expenses ($4,000 * .29 = $1,160).

    USDA guidelines typically allow borrowers to spend a maximum of 41% of their monthly gross income on total monthly housing expense plus all other monthly debt expenses including credit card, auto and student loan payments.  This is known as the back-end debt-to-income ratio.  For example, if a borrower makes $4,000 per month in gross income, the borrower can spend $1,640 per month on his or her total monthly housing expense plus all other debt payments ($4,000 * .41 = $1,640).  The lower borrowers' monthly debt payments, the more they can spend on their mortgage payment and total housing expense, which enables them to qualify for a larger mortgage.  The USDA allows higher debt-to-income ratios in cases where borrowers have higher credit scores (above 660), stable employment and income history (two-plus years), potential for increased earnings and the ability to save money.

    USDA Home Loan Program Borrower Income Limits

    The borrower’s adjusted gross income must not exceed the maximum USDA adjusted gross income limit for the county in which the property is located.  Income from all household members must be included in calculating the borrower’s adjusted gross income.  The borrower’s gross income can be adjusted, or reduced, by certain deductions such as if a child, full-time student, disabled person or elderly person reside in the household, plus certain medical expenses for children or elderly household members can also be deducted to reduce the borrower’s adjusted gross income.  When applying for a USDA home loan in some cases it is better for the borrower to have a lower adjusted gross income so that the borrower does not exceed the income limit.  USDA adjusted gross income limits vary by the number of people in the borrower’s household, with the more people in a household, the higher the limit.

    The adjusted gross income limit for the USDA Guaranteed Loan Program is typically 115% of the median household income for the area.  Because median household income changes by geography, there are different income limits for different areas.  For example, the guaranteed loan program income limit for a family of four in Des Moines, IA is $86,850.  You can review the USDA Guaranteed Loan Program income limits on the USDA web site.

    The adjusted gross income limit for the USDA Direct Loan Program is much lower and is typically 50% - 80% of the median household income for the area.  For example, the direct loan program income limit for a family of four in Des Moines, IA is $65,900.  You can review the USDA Direct Loan Program income limits on the USDA web site.

    First-Time and Repeat Home Buyers

    The USDA Home Loan Program is available to both first-time and repeat home buyers as compared to other no or low down payment programs that are only available to first-time buyers.

    Borrower Financial Reserves Requirement

    Unlike other mortgage programs, the USDA Home Loan Program does not require borrowers to hold savings in reserve at mortgage closing although FREEandCLEAR recommends that you hold enough savings in reserve to cover three-to-six months of total monthly housing expense.  So if your total monthly housing expense is $2,000, we recommend that you hold at least $6,000 in reserves at the time your mortgage closes.

    Home Buyer Counseling

    Unlike other no or low down payment mortgage programs, the USDA Home Loan Program does not require applicants to complete a home buyer counseling class.

  • Program Costs and Fees
  • Mortgage Rate

    The interest rate you pay on a USDA home loan depends on several factors including your credit score.  Borrowers with higher credit scores receive the program’s best interest rate while borrowers with lower credit scores pay higher rates. For borrowers with good credit scores, the interest rate for a USDA home loan is typically .125% - .500% lower than the interest rate for other conventional low down payment programs and slightly lower than interest rate for a FHA mortgage.  USDA mortgage rates are among the lowest of all mortgage programs.  The interest rate for USDA loans is lower because the program is backed by a government agency and borrowers pay USDA mortgage insurance fees.  Borrowers should shop lenders to find the USDA home loan with the lowest rate and fees.

    Closing Costs

    Unlike with conventional mortgages and the FHA and VA mortgage programs, borrowers can include closing costs in their mortgage amount for a USDA home purchase loan.  As long as the property appraises for more than the purchase price you can add closing costs such as lender, appraiser, title company and settlement agent fees to your mortgage amount, up to the appraised value of the property.  Additionally, the upfront USDA guarantee fee can also be added to your loan amount and financed though your mortgage.  The ability to finance part or all of your closing costs is unique to the USDA Home Loan program and reduces the amount of cash borrowers need to contribute upfront to buy a home.   

    Extra Fees

    Borrowers are required to pay standard lender fees and closing costs with a USDA Home Loan. Aside from the up-front guarantee insurance fee, borrowers are not required to pay additional fees to apply for the program.

    Impound Account

    Along with their mortgage payment, the USDA Home Loan Program requires borrowers to pay property tax, homeowners insurance and ongoing insurance guarantee fees into an impound account on a monthly basis. An impound account is a trust account controlled by the lender from which expenses such as taxes and insurance are paid when due. The impound account does not affect the amount of fees the borrower is required to pay for the mortgage.

  • USDA Guarantee Fees / Mortgage Insurance Fees 
  • The USDA Guaranteed Home Loan Program requires that borrowers pay up-front and ongoing USDA mortgage insurance fees, also called a guarantee fees.  The mortgage insurance fees protects lenders against losses that result from defaults on USDA mortgages.  The up-front USDA mortgage insurance fee equals 1.00% of the mortgage amount and the ongoing USDA mortgage insurance fee equals 0.35% of the mortgage amount.  The borrower can add the up-front USDA mortgage insurance fee to the mortgage amount.  Similar to private mortgage insurance (PMI) for conventional mortgages and FHA mortgage insurance premium (MIP) for FHA mortgages, the ongoing USDA mortgage insurance fee is an additional cost to the borrower on top of the monthly mortgage payment.  The ongoing annual USDA mortgage insurance fee is less expensive than PMI or FHA MIP and declines a little every year as your mortgage balance decreases.

    The example below outlines the up-front and ongoing annual USDA mortgage insurance fees for a $100,000 mortgage:

    • Up-front USDA mortgage insurance guarantee fee
      • First, we calculate the total mortgage amount including the the up-front USDA mortgage insurance fee:
      • $100,000 (mortgage amount before USDA mortgage insurance) + $1,000 (up-front USDA mortgage insurance) = $101,000 total mortgage amount
      • $101,000 (total mortgage amount) * 1.00% (up-front USDA mortgage insurance fee) = $1,010 (up-front USDA mortgage insurance fee)
    • Ongoing USDA mortgage insurance guarantee fee
      • $101,000 (total mortgage amount) * .35% (ongoing annual USDA mortgage insurance fee) = $354 (ongoing annual USDA mortgage insurance fee) / 12 months = $29.46 (monthly USDA mortgage insurance fee)

    As of October 1, 2016, the up-front USDA mortgage insurance fee is reduced to 1.0% of the mortgage amount and the ongoing insurance fee is 0.35% of the mortgage amount.

  • Mortgage Type and Loan Amount
  • Mortgage Program

    15 and 30 year fixed rate mortgages are permitted under the USDA Guaranteed Loan Program.  33 and 38 year fixed rate mortgages are permitted under the USDA Direct Loan Program.  For manufactured homes only 30 year fixed rate mortgages are permitted.  Adjustable rate mortgages (ARMs) and interest only mortgages are not allowed under USDA Home Loan Program guidelines.

    Maximum Loan-to-Value (LTV) Ratio

    According to USDA Home Loan Program guidelines, borrowers can finance 100% of the appraised property value plus the up-front USDA guarantee fee (1.00% of the mortgage amount).  So in total, the borrower’s mortgage amount can be up to 102% of the appraised property value for a maximum loan-to-value (LTV) ratio of 102%.  The LTV ratio equals the mortgage amount divided by the property value.  The borrower can also finance closing costs such as lender, title, escrow, attorney and appraisal fees as long as the LTV ratio does not exceed 102%.  For the borrower to include closing costs in the mortgage amount, the appraised property value must be greater than the contracted price at which the buyer has agreed to purchase the property.

    Loan Limit

    There are no loan limits for the USDA Guaranteed Loan Program although USDA borrower income limits effectively cap the mortgage amount you can obtain through the program.  With the USDA Direct Loan Program, in addition to applying income limits, the mortgage amount must be lower than the conforming loan limit for the county in which the property is located.

  • CalculatorUse our CONFORMING MORTGAGE LIMIT CALCULATOR to determine the loan limit for your county
  • Mortgage Type

    The USDA Home Loan Program applies to both home purchase mortgages as well as refinancings of USDA loans.  Borrowers with USDA loans can use the USDA Streamline Refinance Program to refinance their mortgage with less documentation and borrower qualification requirements including no income, assets or credit score verification, no maximum debt-to-income ratio and no appraisal report.

  • Great Mortgage IdeaRelated FREEandCLEAR Resources
    X

    Get Free Personalized Mortgage Quotes

    First Name:
    Last Name:
    Phone Number:
    Email:

    My Mortgage Info

    Mortgage Type
    Credit Score
    Loan Amount
    Property Value
    City
    State
    GET FREE Quotes
    FREEandCLEAR.comThank you for submitting your information!
    FREEandCLEAR.comYour mortgage quote request has been sent to our lending partners and you should receive emails from multiple lenders shortly
    FREEandCLEAR.comComparing proposals from multiple lenders is the best way to save money on your mortgage!
    By clicking "GET FREE QUOTES," you authorize selected lenders and FREEandCLEAR to contact you using the information you provided. This authorization overrides any previous registrations on federal, state, or private Do Not Call registries or any private solicitation preference you previously expressed. You agree that lenders may use automatic dialing systems to make calls to any phone number entered, even to a cell phone or other service for which the called party is charged. You understand that consent is not a condition of purchase.