Definition
USDA Guaranteed loans offer zero-down financing in rural areas with no mortgage insurance for eligible borrowers. Income limits apply, and properties must be in eligible rural locations. Interest rates are typically competitive and favorable.
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Find my pathAbout this term
The USDA loan program targets moderate-income borrowers in rural areas (typically populations under 10,000). The program offers 100% financing (no down payment), no private mortgage insurance (unlike FHA), and typically lower interest rates than FHA. USDA loans require occupancy of a single-family home and have income limits that vary by location. The program guarantees a portion of the loan to the lender, reducing risk. USDA loans are assumable and have flexible qualifying criteria including consideration of non-traditional credit.
Pro Tip
USDA loans have no mortgage insurance and no down payment requirement; if you live in a rural area, this program often beats FHA loans.
Example
A buyer earning $65,000 purchases a home in an eligible rural area with zero down payment, no mortgage insurance, and a 4.2% interest rate through the USDA program.