USDA Home Loan Frequently Asked Questions

Basic USDA Loan Information

What is a USDA singe-family guaranteed home loan?

The USDA Loan is a mortgage option available to qualified rural homebuyers. USDA loans are issued by USDA-approved lenders and guaranteed by the U.S. Department of Agriculture (USDA).

Learn more with this complete guide to the USDA loan.

What is the USDA loan guarantee?

When you hear that the USDA loan is guaranteed, it is in reference to the fact that the USDA insures a portion of each loan in the event the borrower defaults on their home loan. This backing, or guarantee, is what gives lenders more confidence in homebuyers and the ability to extend favorable rates and terms.

Are only first-time homebuyers eligible?

No, first-time homebuyers and repeat homebuyers alike may use the USDA loan.

What is the maximum amount that I can borrow?

There are no maximum loan amount restrictions on USDA loans. An individual’s maximum loan amount is based upon their debts, income and ability to repay.

How much are the closing costs for a USDA mortgage?

Closing costs vary by lender and location. With USDA loans, it is possible to use gift funds to pay for your closing costs. You will need to ask your loan officer for a gift letter and provide proof of transfer to accompany your loan application.

What refinance options does the USDA loan offer?

The USDA offers three refinancing options to for current USDA borrowers: USDA streamline, streamline-assist and non-streamlined refinance. The USDA does not offer a cash-back option. Learn more about USDA loan refinancing here.

USDA Loan Benefits

Do USDA home loans require a down payment?

With the USDA loan program, qualified borrowers can purchase a home without a down payment, saving thousands of dollars in upfront costs.

Do USDA home loans have PMI?

USDA loans have a one-time upfront fee, known as the USDA guarantee fee, which is 1% of the loan amount. Additionally, the USDA has an annual fee that is currently only .35% of the loan amount and financed into the monthly payments. USDA homebuyers can finance the 1% guarantee fee into the total loan to make for a true $0 down loan.

What types of terms do USDA loans have?

USDA loans are available in 30-year and 15-year fixed rate terms.

What can I expect from USDA loan rates?

USDA loan rates are often lower than comparable, 30-year fixed-rate conventional mortgages due to the USDA guarantee.

USDA Home Loan Eligibility

How do I check if my home is USDA-eligible?

With the USDA loan, your home must be located in what the USDA defines as a rural area. Learn more about USDA property eligibility here.

What are USDA eligibility requirements?

As with any lending program, the USDA requires that the borrower demonstrate a reasonable ability and willingness to repay the mortgage loan. USDA lenders will view your credit history and income to verify your ability to repay the mortgage. You can learn more about USDA credit and income requirements here.

What is the USDA's minimum credit requirement?

There is no minimum score required by the USDA; however, to use the USDA’s guaranteed underwriting system (GUS), a borrower must have a 640 credit score or higher.

What does the USDA require for employment eligibility?

If you’re still working, you must establish employment to be eligible for the USDA loan, and most lenders will require a minimum of two years of steady employment. If you are self-employed, you are eligible, but will be required to provide two years of federal tax returns to verify your income. Retirees may be able to obtain a USDA loan provided they have sufficient stable income.

Can I get a USDA loan after bankruptcy?

You may be eligible for a USDA loan three years after a chapter 7 bankruptcy discharge and one year after filing for chapter 13 bankruptcy.

Can I buy a foreclosure with a USDA loan?

USDA home loans can be used to purchase any property so long as the property meets USDA property eligibility requirements. This means that you can use USDA loans to purchase foreclosed homes, short sales and homes sold by real estate agencies or banks after a bankruptcy.

Can I used a USDA loan on investment property?

No, the USDA loan is for primary residences only. Properties primarily meant for income producing purposes do not qualify.

Can you have two USDA loans at the same time?

Since the USDA does not allow buyers to own another property financed by a previous USDA loan, buyers cannot have two USDA loans at the same time. Further, USDA loans must be used for primary residences.

Does a USDA home loan finance modular homes?

Modular homes can be considered a USDA eligible property, but additional appraisal requirements will apply.