What Is USDA Loan?

A USDA loan is a zero-down-payment mortgage backed by the U.S. Department of Agriculture for buyers purchasing in eligible rural and suburban areas. Your household income must be at or below 115% of the area median income to qualify. About 97% of U.S. land mass falls within USDA-eligible boundaries, including many suburban neighborhoods.

On a $250,000 home, a USDA loan requires $0 down. You will pay a 1% upfront guarantee fee ($2,500, which can be financed) and an annual fee of 0.35% of the remaining balance—roughly $73 per month on a $250,000 loan. These fees are significantly lower than FHA mortgage insurance premiums.

Key Facts

• Down payment required: $0 — 100% financing
• Upfront guarantee fee: 1% of the loan amount
• Annual guarantee fee: 0.35% of the remaining loan balance
• Income limit: 115% of area median income (varies by county)

Frequently Asked Questions

Do you have to buy a farm to get a USDA loan?

No. USDA loans are for standard residential homes in eligible areas—you do not need to buy farmland. Many qualifying locations are in suburbs and small towns just outside major metro areas. You can check eligibility on the USDA’s property map.

What credit score do you need for a USDA loan?

Most lenders require a minimum 640 credit score for automated underwriting approval. Borrowers with scores below 640 may still qualify through manual underwriting, which requires stronger compensating factors like low debt-to-income or significant savings.