USDA Loans
Who Is This Loan For?
- Buyers purchasing in rural or suburban areas
- Low-to-moderate income households
- First-time buyers with limited savings for a down payment
- Buyers who want a lower annual fee than FHA with no down payment
- Buyers in smaller towns or communities outside major metro areas
What Is a USDA Loan?
A USDA loan is a mortgage guaranteed by USDA Rural Development for low- and moderate-income households buying a primary residence in an eligible rural area. If you qualify, you can finance 100% of the purchase, so there’s no down payment (USDA Rural Development). It’s one of only two major loan programs, along with VA, that don’t require a down payment.
Don’t let the word “rural” talk you out of it. USDA decides eligibility address by address, and plenty of small towns and suburban communities qualify, including parts of North Carolina outside the Charlotte and Raleigh metro cores and many Florida communities outside Tampa, Orlando, and Miami.
The version most buyers use is the USDA Guaranteed Loan, which runs through approved private lenders. For a full walk-through of buying your first home, see our First-Time Homebuyer Guide.
Not sure which loan fits your situation? Take the quiz or book a free consultation.
USDA Loan Requirements at a Glance (2026)
| Requirement | What USDA asks for |
|---|---|
| Property location | The home has to be in a USDA-eligible rural area. Check the address on the USDA eligibility map. |
| Occupancy | Primary residence only. No investment or income-producing properties. |
| Household income | Adjusted household income at or under the county limit. In most counties that’s $122,800 for 1 to 4 people and $162,100 for 5 to 8 people. |
| Credit score | No USDA minimum. USDA’s automated system (GUS) decides what score works, and lenders can set their own minimums. |
| Debt-to-income | 29% for housing and 41% for total debt as the standard, with room above that when the file is strong. |
| Income history | The lender reviews at least 2 years of income and looks for income likely to continue for at least 3 more. |
| Citizenship | U.S. citizen, U.S. non-citizen national, or qualified alien. |
| Down payment | None required. |
The rest of this page breaks each one down.
USDA Property Eligibility
The home has to be in a USDA-designated eligible rural area. You can check any address on the USDA eligibility map.
What generally qualifies: Small towns, rural communities, and many suburbs outside larger cities. USDA’s definition of “rural area” comes from Section 520 of the Housing Act of 1949 (7 CFR 3555.10), and the map is the final word. Communities a short drive outside a metro sometimes qualify, so check before you rule one out.
What generally doesn’t: Core urban areas and dense suburbs of larger cities.
The home itself: It has to be your primary residence and can’t be income-producing. Detached and attached homes, condos, PUDs, modular homes, and manufactured homes can all qualify if they meet USDA’s standards, and there’s no set acreage limit (USDA Rural Development). USDA won’t guarantee loans on investment properties (7 CFR 3555.151).
USDA Income Limits for 2026
Your household’s adjusted annual income has to be at or under the USDA limit for the county where the home is. The current limits took effect July 13, 2026. In most counties they are:
- 1 to 4 person household: $122,800
- 5 to 8 person household: $162,100
Some counties have higher limits. Check your county and household size with the USDA income eligibility tool (USDA FY 2026 Guaranteed Housing Income Limits). USDA updates these limits every year.
This is the part that surprises people: USDA counts income from every adult in the household, not just the people on the loan (7 CFR 3555.152). That includes:
- Working adult children living at home
- A spouse who won’t be on the loan
- Parents living with you who receive Social Security
- Any other adult in the household with income
This is different from FHA, VA, and conventional loans, which only look at the borrowers’ income.
Deductions can help. USDA compares the limit to your adjusted income, which is your household income minus certain deductions. Those include a deduction for each child under 18, full-time student, or adult with a disability in the household (other than you and your spouse), child care costs for kids 12 and under that let someone work or go to school, certain disability-related care costs, a deduction for elderly households, and, for elderly and disabled households, medical costs above 3% of household income (7 CFR 3555.152). If your household looks a little over the limit, these are worth running before you give up on USDA.
USDA Credit Score Requirements
Credit score: USDA doesn’t set a minimum credit score. The program asks you to show you’re willing and able to manage debt (USDA Rural Development). When a loan runs through USDA’s Guaranteed Underwriting System (GUS), GUS decides which score is acceptable for its recommendation (HB-1-3555, Chapter 10).
If GUS comes back with a Refer, or the loan is manually underwritten, at least one borrower whose income or assets are used needs a validated score. That means two credit accounts on the report that have been open for at least 12 months. Without that, USDA lets the lender document other payment history instead, like rent, utilities, or insurance (HB-1-3555, Chapter 10).
Lenders can also add their own minimum scores on top of USDA’s rules. That’s why the same file can get a yes from one lender and a no from another, and why it matters to work with a loan officer or broker who can shop multiple lenders for you. If your score is around 600, here’s what buying with a 600 credit score really looks like.
Collections: USDA doesn’t require medical collections to be paid. If your non-medical collections add up to more than $2,000, the lender will have you pay them off, use a payment plan, or count 5% of the balance as a monthly debt (HB-1-3555, Chapter 10).
Bankruptcy: A Chapter 7 bankruptcy discharged more than 36 months before you apply isn’t treated as adverse credit. GUS can approve some files sooner, and on a manually underwritten file the lender can still approve it with a documented credit exception (HB-1-3555, Chapter 10).
Debt-to-Income, Employment, and Other Requirements
Debt-to-income ratio: USDA’s standard is 29% of repayment income for your housing payment and 41% for total debt (7 CFR 3555.151). The housing side includes principal, interest, taxes, insurance, HOA dues, and the monthly portion of the USDA annual fee. GUS can approve higher ratios based on the full file. On a manually underwritten loan, going over takes documented compensating factors, like cash reserves, a small jump from your current housing payment, or a long, stable job history.
Employment and income history: The lender looks at at least the past 2 years of your income and needs to see income that’s likely to continue for at least the next 3 years (7 CFR 3555.152). Self-employed? You can qualify, and you’ll usually document it with two years of tax returns.
Citizenship: U.S. citizens, U.S. non-citizen nationals, and qualified aliens are eligible (7 CFR 3555.151).
Down payment: None required.
USDA Guarantee Fee: Lower Than FHA’s Mortgage Insurance
USDA’s guarantee fee works like mortgage insurance, and it costs less than FHA’s. FHA charges a 1.75% upfront premium and, on most loans, a 0.55% annual premium (HUD Mortgagee Letter 2023-05). For USDA’s fiscal year 2027 (October 1, 2026 through September 30, 2027), the fees are the same for purchases and refinances (USDA Rural Development):
Upfront guarantee fee: 1.0% of the loan amount
- Can be financed into the loan (rolled into the loan balance)
- Seller or interested party contributions can pay all or part of it
- Calculated on the total loan amount
Annual fee: 0.35% of the remaining loan balance
- Divided into 12 monthly installments
- Lasts the life of the loan
- Decreases each year as your principal is paid down
- Can be eliminated by refinancing into a conventional loan once you have 20% equity
USDA vs. FHA cost comparison on a $250,000 loan:
| Insurance Cost | USDA | FHA |
|---|---|---|
| Upfront Fee | 1.0% ($2,500) | 1.75% ($4,375) |
| Annual Premium | 0.35% (~$73/mo) | 0.55% (~$115/mo) |
| Monthly Savings | - | USDA saves ~$42/mo |
| Cancellable? | No (life of loan) | No (if under 10% down) |
USDA costs $1,875 less upfront and about $42 less per month compared to FHA. While the annual fee lasts the life of the loan, the cost is low enough that the incentive to refinance just to drop it is much smaller than with FHA.
USDA vs. FHA vs. VA
| Feature | USDA | FHA | VA |
|---|---|---|---|
| Down Payment | 0% | 3.5% | 0% |
| Credit Score | No USDA min. (GUS decides) | 500 | No min. |
| Annual MI/MIP | 0.35% | 0.55% | None |
| Upfront Fee | 1.0% | 1.75% | 2.15% |
| Income Limit | Yes (county limit) | No | No |
| Location Restriction | Yes (rural/suburban) | No | No |
| Property Use | Primary only | Primary only | Primary only |
Choose USDA if: You’re buying in an eligible area, your household income qualifies, and you want a low-cost way to buy with no down payment.
Comparing programs? See my breakdowns of FHA loan requirements in Florida and conventional loan requirements in Florida and North Carolina.
USDA Loans in North Carolina and Florida
The rules above are national, so they’re the same in Raleigh as they are in Ocala. What changes from place to place is which addresses are eligible and what the income limit is for that county. In North Carolina, that often means towns outside the Charlotte and Raleigh metro cores. In Florida, it often means communities outside Tampa, Orlando, and Miami. Either way, I check the address and your household’s income against the county limit before you make an offer, so nobody falls in love with a house USDA won’t touch.
The USDA Loan Process
Step 1: Check eligibility. We verify the property address qualifies on the USDA map and confirm your household income is within limits. This takes minutes.
Step 2: Pre-approval. Standard credit, income, and debt review. You’ll get a pre-approval letter to shop with.
Step 3: Home search. Find a home in an eligible area. We’ll double-check any address before you make an offer.
Step 4: USDA appraisal. Similar to FHA. The appraiser checks value and basic property conditions. USDA appraisals ensure the home has adequate water, sewage, and structural soundness.
Step 5: Underwriting (two layers). After lender underwriting, the file also goes to USDA Rural Development for final approval. This additional step can add 1-2 weeks to the timeline.
Step 6: Closing. Sign, fund, and move in. Total timeline: 35-50 days (slightly longer than conventional due to USDA office review).
Not sure how much home you can afford? Use our affordability calculator.
Frequently Asked Questions
What are the requirements for a USDA loan?
The home has to be in a USDA-eligible rural area and be your primary residence, and your household’s adjusted income has to be at or under the county limit ($122,800 for 1 to 4 people and $162,100 for 5 to 8 people in most counties for 2026). You also need to be a U.S. citizen, U.S. non-citizen national, or qualified alien, show acceptable credit, and fit USDA’s debt ratios, which are 29% for housing and 41% for total debt as the standard. No down payment is required.
What credit score do you need for a USDA loan?
USDA doesn’t set a minimum credit score. Its automated underwriting system, GUS, decides what score is acceptable for each file, and lenders can add their own minimums on top. If GUS doesn’t approve the file, a lender can still underwrite it manually, but the underwriter will take a much closer look at your credit history.
What areas qualify for USDA loans?
Small towns, rural communities, and many suburbs outside larger cities can qualify. Check any address on the USDA eligibility map. Areas just outside Charlotte, Raleigh, Tampa, and other metros sometimes qualify.
What are the income limits for a USDA loan?
Your household’s adjusted income has to be at or under the limit for your county. For 2026, the limits in most counties are $122,800 for 1 to 4 person households and $162,100 for 5 to 8 person households, and some counties are higher. Check the USDA income eligibility tool for your county and household size. Remember, USDA counts income from all adults in the household, not just the borrowers on the loan.
Can I build a new home with a USDA loan?
Yes. USDA offers single-close construction-to-permanent loans that let you build a new home in an eligible rural area with zero down payment. The loan guarantee is issued before construction begins, and the construction loan converts to a permanent mortgage when the home is finished, all in one closing. The builder and plans must meet USDA standards.
How long does a USDA loan take to close?
Typically 35-50 days. The extra time compared to conventional loans comes from USDA’s own review, which happens after lender underwriting is complete.
Do I have to be a first-time homebuyer for a USDA loan?
No. You don’t have to be a first-time buyer. If you already own a home, USDA adds conditions. Among them, your current home has to no longer meet your needs, you can’t still be on another USDA home loan when the new one closes, and you have to move into the new home as your primary residence ( 7 CFR 3555.151 ).
Can I use USDA in a city?
Not within the core of larger cities. But many communities that feel suburban, with shopping centers, good schools, and easy highway access, still qualify because they fall outside USDA’s boundary lines. Always check the map before assuming you don’t qualify.
Can I refinance my existing USDA loan?
Yes. USDA offers the Streamlined-Assist refinance for existing USDA borrowers, which requires minimal documentation, no new appraisal, and no new credit qualifying. This is one of the easiest refinance options available if you already have a USDA loan and want to lower your rate.
Does USDA require medical collections to be paid?
No. USDA doesn’t require medical collections to be paid, and they don’t count toward the $2,000 non-medical collections total that can trigger payoff or a payment in your debt ratio.
What if my household income is slightly over the limit?
USDA compares the limit to your adjusted income, after deductions. Those include a deduction for each child under 18, full-time student, or adult with a disability in the household (other than you and your spouse), child care for kids 12 and under, a deduction for elderly households, and certain disability and medical costs. A lender can run your adjusted income to see if you’re eligible.
Is the USDA guarantee fee the same as PMI?
No. USDA calls it a “guarantee fee” rather than mortgage insurance, though it works in a similar way. The key differences: USDA’s annual fee (0.35%) is lower than FHA’s annual MIP (0.55%) and most conventional PMI rates. But unlike conventional PMI, which can be removed at 80% LTV, USDA’s annual fee lasts the life of the loan unless you refinance into a different loan type.
