What are the USDA Loan Requirements and Rates?

In this article, we will discuss and cover USDA loans for homebuyers in eligible rural areas. The USDA Rural Development Guaranteed Housing Loan program offers a special mortgage loan program that offers 100% financing to qualified borrowers. Unlike other loan programs, only homes in selected USDA Designated Areas in the United States qualify for USDA loans. The United States Department of Agriculture insures all USDA loans. The biggest benefit and selling point of USDA loans is there is no down payment required to purchase a home. Mortgage companies offer these loan programs to borrowers who meet the USDA agency guidelines.

USDA Loans Has Household Income Cap

In the event, that borrowers default on their mortgages, USDA Rural Development Guaranteed Housing Loan Program will step in and partially insure and guarantee the lender against the loss. Due to the government guarantee, lenders are more than eager and willing to offer USDA loans. USDA loans have competitive mortgage rates. Homebuyers can purchase a home with no money down with a USDA mortgage. USDA mortgages have the same features as other traditional mortgage loan programs like FHA, VA, and Conventional. USDA loans offer 30-year fixed-rate loans at low mortgage rates and with no prepayment penalty. USDA loan programs are for both first-time home buyers and seasoned homebuyers.

Mortgage Insurance on USDA Loans
Mortgage Insurance on USDA Loans

Like FHA mortgages, USDA requires borrowers to pay upfront and annual mortgage insurance premiums to the U.S. Department of Agriculture. There is a 2% upfront mortgage insurance premium fee charged on any purchase and refinance on USDA mortgages. The Upfront USDA mortgage insurance premium can be rolled into the balance of the loan and does not need to be paid out of pocket. Then there is a 0.40% annual mortgage insurance premium on the balance of the loan. The annual mortgage insurance premium is paid monthly along with the principal and interest.

Eligibility Requirements for USDA Loans

To be eligible for a USDA loan, the property needs to be located in a USDA-approved area. There is no down payment required as long as the property is in a USDA-approved area and the homebuyer meets the USDA mortgage guideline requirements. The maximum debt to income ratio allowed for a borrower is capped at 41% DTI.

Types of Terms on USDA Loans

There are 15-year fixed-rate mortgage loan programs and 30-year fixed-rate mortgage loan programs available. There are no adjustable-rate mortgage products on USDA loans. USDA loans are for owner-occupant properties only. Second homes and investment homes do not qualify for USDA loans. USDA does not allow for cash-out refinance mortgage loans. For homeowners intending on refinancing with a USDA mortgage then the rate and term refinance is the only program.

USDA Mortgage Lenders With No Lender Overlays
USDA Mortgage Lenders With No Lender Overlays

Capital Lending network Inc is a national five-star mortgage company licensed in multiple states with no lender overlays on government and conventional loans. We do not have any lender overlays on USDA, FHA, VA, and Conventional loans. We are also correspondent lenders on non-QM loans and bank statement loans for self-employed borrowers. There are no waiting period requirements after bankruptcy and foreclosure with non-QM loans.

Can You Qualify For USDA Mortgage Loans With Zero Money Down And No Closing Costs?

USDA loans do not require any down payment. Lenders can offer 100% financing on USDA loans. However, all home purchase and/or refinance transactions have closing costs. Closing costs on USDA loans and other loan programs can be covered with seller concessions and/or lender credit. Therefore, if you have your real estate agent negotiate a seller concession with the home sellers, the homebuyer can purchase a home with a USDA loan with no down payment and closing costs.

How Do I Qualify For USDA Mortgage Loans?

You can actually get into a home with a USDA loan with zero down payment and zero closing costs. If you are short on closing costs even with a seller concession, lenders can cover the difference with a lender credit in lieu of a higher mortgage rate. Homebuyers are only eligible to qualify for USDA mortgage loans only in designated rural areas of the United States. Not all areas are eligible for USDA loans. In this article, we will discuss and cover the USDA Agency Mortgage Guidelines and how to qualify for USDA home loans.

USDA Home Loan Requirements on Down Payment
USDA Home Loan Requirements on Down Payment

USDA and VA loans are the only two mortgage loan programs that a homebuyer can purchase a home with no money down and offers 100% financing. The other such mortgage loan program where no money down is required is VA loans. But you need to be a veteran to qualify for a zero-down payment VA loan. There are qualification requirements for USDA home loans and not every property or mortgage loan borrower will qualify for USDA loans. There are certain USDA Loan mortgage lending guidelines to qualify for USDA loans.

Requirements For USDA Mortgage Home Loans

Below are the eligibility requirements for a home buyer to qualify for USDA Mortgage Home Loans. Borrowers’ household income and monthly expenses need to meet USDA mortgage lending guidelines. Standard debt-to-income ratios are 29% front-end debt-to-income ratios and the back-end debt-to-income ratios are capped at 41%. This is much lower than FHA’s 46.9% front-end debt to income ratio caps and 56.9% back-end debt to income ratio caps. Minimum credit scores of 580 are required for zero down payment USDA loans. Under 580 scores are permitted on FHA loans. HUD requires under 580 scores require a 10% down payment.

USDA Home Loan Requirements With High Debt To Income Ratio
USDA Home Loan Requirements With High Debt To Income Ratio

The debt-to-income ratios can be exceeded as long as the USDA mortgage loan applicant has compensating factors. Even though a home buyer can qualify for USDA loans with a 580 credit score, many lenders have credit score overlays. Most lenders like to see 620 scores. It is possible to get an approve/eligible per automated underwriting system with a 580 credit score on USDA loans. USDA loan mortgage applicants can have household incomes of up to 115% of the household income for the area.

What Types Of Homes Are Eligible For USDA Loans?

All USDA loan programs require that the home buyer need to be an owner-occupant of the subject property to qualify for a USDA loan. The type of properties that qualify for USDA home loans are the following:

  • single-family homes
  • condominiums
  • planned unit developments
  • prefab/manufactured homes

The subject property needs to be located in an approved rural development area designated and approved by USDA Rural Development.   The property must be located in an approved rural area, as defined by the USDA.

Qualifying For USDA Mortgages With No Overlays

Capital Lending Network Inc. is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. CLN has no lender overlays on USDA mortgages. Remember that USDA home loans are not available in all areas and are limited to designated counties in the United States that have been designated USDA eligible areas. USDA mortgages also have a maximum household income limit. The income limit is based on the number of people in the household. Debt to income ratio caps is only limited to a 29% front end and 41% back end.

Comparing FHA Versus USDA Home Loans

We have other loan programs with little down payment for those homebuyers who cannot meet the USDA eligibility agency guidelines. FHA loans can have a 46.9% front-end and 56.9% back-end debt-to-income ratio cap on FHA loans. Homebuyers who need to qualify for USDA Home Loans with a mortgage company licensed in multiple with no mortgage overlays can contact us at 800-909-8569. Or email us at contact@capitallendingnetwork.com. The team at Capital Lending Network is available 7 days a week, on evenings, weekends, and holidays. We will go over each borrower’s credit and income profile and recommend the best loan program with a low down payment at the best rates.


Michael Gracz NMLS 1160212 is a veteran mortgage loan officer at Nexa Mortgage LLC. Mike can help borrowers with less than perfect credit and higher debt-to-income ratios. Due to Nexa Mortgage being a no overlay lender on government and FHA Loans, Mike can structure any less than perfect borrowers' files and help them qualify for a home loan in a matter of a short time. It is not if you can qualify for a mortgage with Mike but when. Mike Gracz can be reached at 630-659-7644 or email at mgracz@gustancho.com