The United States Department of Agriculture (USDA) mortgage is a mortgage available for certain properties located in rural areas.  It allows home buyers to buy a home with zero downpayment provided they do not exceed the income limits.  The credit score requirements for the USDA mortgage will depend on the loan type but usually are less strict compared to conventional mortgage loans.  This article provides a helpful guide for those considering whether to use a USDA mortgage to buy a home.

Benefits of the USDA Mortgage

The biggest benefit of the USDA mortgage is the ability to buy a home with no down payment requirements.  The USDA mortgage will require the payment of an upfront funding fee that can be financed into the loan if desired.  The USDA mortgage will also have an annual fee that will be paid on a monthly basis and is for the life of the loan.  The annual fee is not mortgage insurance, and mortgage insurance is not a requirement for the USDA mortgage. The USDA mortgage is different compared to the FHA mortgage. The FHA mortgage does not have any restrictions on where the home can be located. The FHA mortgage also does not allow for a zero down payment.

Types of USDA loans

The USDA Direct Loan is a loan provided directly by the USDA and currently has an interest rate of 5%.  This loan is available for low-income or very low-income individuals only.  Since this loan is available through the USDA only a local lender cannot help homebuyers with the USDA Direct Loan.  Instead, home borrowers wishing to apply for this loan should go directly and apply with the USDA.  Applications for the USDA Direct Loan take longer than the typical mortgage process does so it is best to start as early as possible.

The Single Family Guaranteed Loan Program allows private mortgage lenders to offer USDA guaranteed mortgages.  Since these mortgages are guaranteed by the USDA, mortgage lenders are able to expand the offering of this mortgage to many more buyers.  There are maximum income requirements for this loan and for 2026 that income level cannot be above $128,600.00 for all members of the household who are working.  Regardless of whether the household member will be on the loan or not, the entirety of their income will be included in the maximum household income calculation unless they are under the age of 18.

USDA Renovation Loan – Covers not only the purchase of a home but also the repair of a home that needs major repairs/updates.

Properties Covered by the USDA Mortgage

Not every home can qualify for a USDA mortgage.  For instance, homes in the city of Cincinnati, Ohio area would not qualify for the USDA mortgage.   USDA mortgages are exclusively for use on rural properties only.  USDA mortgage lenders can let a homebuyer know whether the property they are interested in would qualify for the USDA mortgage.  Homebuyers wanting to search on their own whether a property qualifies for a USDA mortgage can use the Property Eligibility Map found on the USDA’s website.

The USDA mortgage can be used for owner occupied homes only.  That means no investment properties where the owner will not occupy one of the units.  The homebuyer can use a USDA mortgage to buy a 2-4 unit building where they will occupy one of the units and will be allowed to rent out the other units.

Who Can Use the USDA Mortgage?

The USDA has maximum income limits at which if the borrower makes more than that, they will not qualify for the loan.  The income limits can vary based on the location and will vary based on the type of USDA loan (see above).  

As noted above properties in rural locations as specified in the Property Eligibility Map linked above are the only places where a USDA mortgage can be used to purchase a home.  Other than that, there are no other restrictions on who can buy a home with a USDA mortgage.

How To Apply for the USDA Mortgage

The process for applying for the USDA mortgage (including a mortgage pre-approval letter) is as easy as finding a mortgage lender who offers the USDA mortgage and applying with them according to their application processes. So long as the property one is interested in falls within the rural area locations the lender can move forward with the application once all documents are received. There is no difference in terms of buying a house when it comes to the mortgage application process. The home buyer needs to start the process ahead of time and get a pre-approval letter prior to even visiting any homes.

Final Thoughts

The USDA mortgage is a great way to get into a home with little to no money down and competitive interest rates for rural properties.  If you as a home buyer do not exceed the income limits this is a great program to apply for.  Be sure to reach out to discuss your individual situation and property and see if a USDA mortgage would benefit you!

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