By the HomeAffordLab team · Last updated October 27, 2026
A USDA loan lets moderate-income buyers purchase a home in an eligible rural or suburban area with no down payment. Instead of private mortgage insurance, USDA charges a 1% upfront guarantee fee, which can be financed, and an annual fee of 0.35% of the balance, paid monthly. Household income must be at or below 115% of the area median.
On a $300,000 home with nothing down, the loan comes to $303,000 with the upfront fee, and the full monthly payment is about $2,624 at a 7.32% rate, including property tax and insurance. This guide explains who qualifies, what USDA loans cost, and how they compare with FHA.
Key takeaways
- USDA guaranteed loans require no down payment.
- Fees: 1% upfront (can be added to the loan) plus 0.35% a year, paid monthly.
- Household income can’t exceed 115% of the area median, and the home must be in a USDA-eligible area.
- Lenders typically want a credit score of 640 or higher for automated approval.
- Debt-to-income guidelines are 29% for housing and 41% for all debts.
In this guide: What a USDA loan is · Eligibility · USDA fees · Example payment · USDA vs. FHA · How to apply · FAQ
Mortgage Payment Calculator
Your full monthly payment: principal, interest, property tax, homeowners insurance, PMI or FHA mortgage insurance, and HOA dues.
Loan balance and what you pay over time
Each year’s principal and interest, and the balance left at year end.
Year-by-year amortization table
| Year | Principal | Interest | Balance |
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What is a USDA loan?
The U.S. Department of Agriculture’s Rural Development agency backs home loans to encourage homeownership outside major cities. Most borrowers use the Single Family Housing Guaranteed Loan Program, where a private lender makes the loan and USDA guarantees part of it. That guarantee is what allows 100% financing.
“Rural” is broader than many people think. Large parts of the country, including many small towns and outer suburbs, are eligible. You can check any address on USDA’s eligibility map before you make an offer.
USDA loan eligibility requirements
| Requirement | USDA guaranteed loan rule |
|---|---|
| Location | The home must be in a USDA-eligible area |
| Income | Total household income at or below 115% of the area median income |
| Down payment | None required |
| Credit score | No USDA minimum; lenders generally want 640 or higher for automated approval |
| Debt-to-income ratio | 29% for housing and 41% for all debts, higher with strong compensating factors |
| Property use | Primary residence only; no investment properties or second homes |
| Property type | Single-family homes, approved condos, and some manufactured homes |
| Citizenship | U.S. citizen, U.S. non-citizen national, or qualified alien |
The income limit counts everyone in the household, not just the people on the loan. That catches many applicants by surprise: an adult child or relative with a job living in the home can push the household over the limit even if they’re not borrowing. Limits vary by county and household size, so check the current figure for your area.
USDA loan fees
USDA loans don’t have PMI. Instead they charge two guarantee fees:
- Upfront guarantee fee: 1% of the loan amount, usually added to the loan. On a $300,000 loan, that’s $3,000.
- Annual fee: 0.35% of the remaining balance each year, split into monthly payments. On a $303,000 loan, it starts at about $88 a month and falls slowly as you pay down the loan.
Unlike conventional PMI, the annual USDA fee generally lasts for the life of the loan. Refinancing into a conventional loan once you have 20% equity is the usual way to drop it.
Example USDA loan payment
For a $300,000 home with no down payment, a 30-year rate of 7.32%, 1.0% property tax, and $2,450 a year in insurance:
| Item | Amount |
|---|---|
| Upfront guarantee fee (1%, financed) | $3,000 |
| Loan amount | $303,000 |
| Principal and interest | $2,081 |
| Annual fee (0.35%, monthly) | $88 |
| Property tax | $250 |
| Homeowners insurance | $204 |
| Total monthly payment | $2,624 |
Use the payment calculator above with your own price and rate. Enter 0.35% as the mortgage insurance rate to approximate the USDA annual fee.
USDA vs. FHA
For buyers who qualify for both, here’s how the same $300,000 home compares at the same 7.32% rate:
| USDA | FHA | |
|---|---|---|
| Down payment | $0 | $10,500 (3.5%) |
| Upfront fee | 1% ($3,000) | 1.75% ($5,066) |
| Annual fee | 0.35% | 0.55% |
| Full monthly payment | $2,624 | $2,610 |
| Income limit | Yes, 115% of area median | No |
| Location limit | Eligible areas only | Anywhere, within FHA loan limits |
| Minimum credit score | Lenders often want 640 | 580 (500 with 10% down) |
The monthly payments are almost identical, but USDA saves you the $10,500 down payment and has lower fees. FHA is more flexible on credit, income, and location. If you qualify for USDA, it usually wins on cash needed to buy. Compare with our FHA loan calculator.
How to apply for a USDA loan
- Check the property and income maps on USDA’s eligibility site for the areas you’re considering.
- Find a USDA-approved lender. Many banks, credit unions, and mortgage companies offer guaranteed loans.
- Get preapproved so you know your budget and can make a stronger offer. See our preapproval guide.
- Make an offer and order the appraisal. The home must meet USDA property standards.
- Wait for USDA approval. After your lender approves the loan, USDA issues its guarantee, which can add time before closing.
Frequently asked questions
Do I have to be a first-time buyer for a USDA loan?
No. You generally can’t own another adequate home nearby, but you don’t have to be a first-time buyer.
Can I buy a farm with a USDA home loan?
No. Guaranteed home loans are for primary residences, not income-producing farms. USDA has separate farm loan programs.
Can closing costs be included in a USDA loan?
In some cases. If the home appraises for more than the price, the extra value can sometimes be used to finance closing costs. Sellers can also contribute toward your closing costs.
Is there a USDA loan limit?
Guaranteed loans don’t have a fixed loan limit. The income limit and your debt-to-income ratio cap how much you can borrow.
The bottom line
If you buy in an eligible area and your household income is within the limit, a USDA loan offers 100% financing with lower fees than FHA. Expect a 1% upfront fee, a 0.35% annual fee, and a lender credit score requirement of around 640. Check the eligibility maps first, then compare USDA and FHA quotes side by side.
Estimates only. HomeAffordLab is not a lender and does not provide financial advice. This page may contain ads. See our Advertising Disclosure.
Sources: USDA Rural Development: Single Family Housing Guaranteed Loan Program · GoMortgage: USDA loans in 2026 · Freddie Mac Primary Mortgage Market Survey