Here’s Everything You Need To Know About USDA Loans


You’d probably think of farmlands or hilltop houses when you hear or read up about home loans backed up by the United States Department of Agriculture (USDA). That’s pretty much understandable since we can automatically associate the USDA with farms, ranches, or vineyards. But there’s more to USDA loans than meets the eye.

In fact, that’s just one of the many misconceptions or frequently asked questions about USDA home loans that have to be answered. Home loans backed by the USDA does not necessarily mean you need to choose a property in a farm somewhere very far away from the city. In fact, there are a lot of locations are considered rural and are USDA-approved that is not far from metropolitan areas.

Also, it’s been gaining quite the popularity even in some first-time homebuyers. It’s been a choice for many borrowers because of their achievable guidelines and their attractive benefits. Let’s talk about their pros and cons as well as eligibility and requirements.


The most attractive upside to getting a USDA-backed loan is its opportunity for interested homebuyers to score a mortgage with zero down payment. This home loan is one of the few that offers 100% financing. Also, they allow borrowers to use gift funds to pay for their closing costs.

This home loan allows interested borrowers to qualify even if they have bad credit. Thanks to their flexible guidelines, you can still score a loan even if you’ve had a shaky credit history. And other than that, property eligibility extends to modular and manufactured houses and there are no restrictions in allowed lot size.

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Probably one of the downsides to USDA loans is that it has specific restrictions with regard to location. If you’re looking into living in cities, metropolitan areas or what the USDA does not qualify as a “rural” location. But if you like to live in a suburbs that’s not far from the city, there are eligible locations all across the country. Duplex houses are not allowed if you’re under this mortgage.

Also, this loan has specific income limits. For a borrower to qualify, the family income should not go beyond 115% of the median household income for the location in which the residence is in. It means that if you have too many assets than the limit, maybe you should consider other home loan options.


Like any other loan, there are specific requirements in order to see if your qualify. For USDA loans, there are at least two things that are usually looked into. First, your income then, your chosen property location.

As mentioned, the applicant’s income should not be more than 115% of the median income for the area in order to qualify. Take note that this is for the USDA Guaranteed Housing Loan which caters to average income borrowers. As for the low-income families, perhaps the USDA Direct Housing Loan is a good option. It allows borrowers to have about 50-80% income in order to qualify.

In order to know if your chosen property is within an eligible rural area as per the USDA, it’s best to check each type of their home loan programs on their site and see if it qualifies. Instructions are specified on the page. Other than that, you can also see other eligibility matters and loan basics on each program.

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