A USDA (U.S. Department of Agriculture) loan is a great option for buyers with moderate or low income. It lets you buy a house with no money down and low mortgage rates — two huge benefits that only one other loan program (the VA loan) offers. If your home is in an eligible area, it’s worth exploring a USDA guaranteed loan. In 2022, in most U.S. counties, you can borrow up to $336,500 with a USDA Direct Loan. Limits are higher in more expensive housing markets. USDA guaranteed loans do not have loan limits. A USDA home loan is often the best choice for borrowers who meet the U.S. Department of Agriculture’s guidelines. With no down payment requirement and low mortgage insurance rates, USDA mortgages are often cheaper than FHA loans, both upfront and in the long run. USDA home loans often also have lower rates than conventional mortgages because the government is taking on the risks associated with lending.

Qualifying For A USDA Guaranteed Mortgage Loan

USDA mortgages stand alone as the only mainstream zero money down program available to borrowers that have not served in the military. Eligible borrowers will be hard-pressed to find a home loan program that offers more favorable terms. To be eligible for a USDA loan, applicants must meet the basic eligibility requirements set forth by the USDA, which cover credit, income, property usage, and home location.

At a minimum, USDA guidelines require:

  • U.S. citizenship or legal permanent resident (i.e. U.S. non-citizen national or qualified alien)
  • Ability to prove creditworthiness, typically with a credit score of at least 640.
  • Stable and dependable income
  • A willingness to repay the mortgage – generally 12 months of no late payments or collections.
  • Adjusted household income is equal to or less than 115% of the area median income.
  • The property serves as the primary residence and is located in a qualified rural area.

Lenders may have their own internal guidelines and requirements in addition to those set by the USDA’s Rural Development program.

What Is The Single-Family Housing Direct Home Loan Also Known As?

Also known as the Section 502 Direct Loan Program, this program assists low- and very-low-income applicants to obtain decent, safe, and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income.

What Are The Different Types Of USDA Loans?

  • Guaranteed USDA Loan: USDA partners with local lenders to offer guaranteed loans. While borrowers do not have to pay for PMI (private mortgage insurance) they will have to pay an upfront fee of 1% and an annual fee of 0.35% of the loan balance, which is amortized across the monthly payment.
  • Direct USDA Loan: USDA funds the borrowers of these loans directly. These mortgages are for low and very low-income applicants who are without safe housing or can’t access a traditional home loan. Income thresholds vary by region.
  • USDA Home Improvement Loans: These loans help low-income Americans repair or enhance their homes. Loans are capped at $40,000 while grants have a maximum of $10,000. Loan terms are for 20 years with a 1% interest rate. If the borrower sells the home within three years, they have to repay any grant money.

Applications for the USDA program are accepted through your Rural Development Office year-round.


Contact Dan (954-336-1922) for a free consultation!

About Dan Campanella – Mortgage Specialist 

Dan provides clients with years of proven experience and an abundance of financing options for their mortgages. His common sense approach and devotion to customer service is what sets him apart in the highly competitive mortgage industry. Dan prides himself on consistently delivering “referable services” to his clients, referral sources, and partners.