USDA loans are zero-down-payment mortgages for rural and suburban homebuyers. These loans are issued by the United States Department of Agriculture through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program. Just because it’s a program of the Department of Agriculture doesn’t mean you have to be a farmer or rancher, though. Eligibility is based mainly on income and location, and these loans are popular due to their lower interest rates and no-down-payment option.
These loans were established for those with low to moderate incomes who don’t meet the income requirements to get a traditional mortgage. Designed to “improve the economy and quality of life in rural America,” applicants can purchase a dwelling in an eligible rural or suburban area.
The USDA loan process is like that of any other mortgage, except that the USDA guarantees the mortgage – similar to an FHA loan or VA loan. This allows you to get low mortgage interest rates, even without a down payment. You will have to pay a mortgage insurance premium with no down-payment, however.
To be eligible for a USDA loan, you must meet the basic requirements set forth by the USDA, which cover credit, income, property usage, and home location.