USDA Loans: A Complete Guide

Key Features of USDA Loans

• Zero down payment

• Low fixed interest rates

• Reduced mortgage insurance

• Flexible credit guidelines

• Restricted to primary residences only

Minimum Qualifications

To qualify, buyers must meet income and location guidelines and demonstrate the ability to repay the loan:

• Credit Score: 640+ preferred for streamlined approval

• DTI Ratio: Typically 41% maximum

• Income Limits: Household income must not exceed 115% of the area median income (AMI)

• Property Eligibility: Must be located in a USDA-approved rural area

• Occupancy: Property must be used as a primary residence

Required Documents

You’ll need:

• Recent 30 days of pay stubs

• Last 2 years of W-2s or tax returns

• 2+ months of bank statements

• Government-issued photo ID

• Credit authorization form

• Proof of income from all adult household members

USDA Guarantee & Annual Fees

USDA loans include:

• Upfront Guarantee Fee: 1% of the loan amount (can be financed into the loan)

• Annual Fee: 0.35% of the remaining loan balance (included in monthly payment)

These fees help support the USDA program and keep rates low for qualifying buyers.

Seller Concessions

USDA allows sellers to contribute up to 6% of the home’s purchase price toward the buyer’s closing costs. This can cover lender fees, taxes, insurance, and prepaid items—but not the down payment (which isn’t needed anyway).

Property Requirements

• Must be modest, safe, and sanitary

• Must meet HUD standards and pass a USDA appraisal

• Cannot be income-producing (no working farms or businesses)

Loan Limits

USDA loans do not have a set maximum loan amount. Instead, limits are determined by what you qualify for based on income, DTI, and property location.