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What is a USDA Mortgage?

A USDA home loan is a Zero down payment mortgage for eligible rural and suburban home buyers. USDA loans are issued through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture. The USDA guarantees the mortgage.

Do I Qualify for a USDA-backed mortgage guarantee?

There are Income limits to qualify for a USDA mortgage. This means you must make less than the limit to qualify. These loans are intended for low and moderate income households. The limit depends upon where you live and household size. To check to see if you qualify click USDA Income Limits

USDA guaranteed home loans are only for owner-occupied primary residences. Other requirements are: U.S. citizenship or permanent residency, monthly debt payments you make cannot exceed 41% of your income, dependable income, acceptable credit history with no collections reported in the last 12 months.

What Homes can I buy with a USDA mortgage?

Metropolitan areas are generally excluded from USDA programs, but pockets of opportunity can exist in suburbs. Rural locations are always eligible. To find eligible areas click USDA eligible areas

What are the advantages?

  • Lower down payment than conventional or FHA financing
  • Lower mortgage insurance than conventional or FHA loans
  • More lenient credit score requirements than for conventional loans
  • Unlike VA loans, there is no military service requirement
  • The only zero-down loan on the market besides the VA mortgage
  • There are no mortgage loan amount limits for USDA loans
  • The Seller of the home can pay buyers closing costs
  • You don’t need a high FICO score to qualify for USDA loans

What are the Mortgage Fees For a USDA loan?

The fees are very low especially compared to what they would pay for other low down payment mortgages.

The USDA mortgage has an upfront fee of 1.0% of the loan amount, and a monthly fee equal to 0.35% of the loan balance per year.

For a $100,000 loan, that’s $1,000 upfront and about $29 per month. This is much lower compared to FHA and Conventional loans that have mortgage insurance.

The USDA upfront fee can and usually is rolled into the loan amount and does not have to be paid in cash.


Jason Kaplan

Sr. Loan Officer

Mortgage Lending Associates



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