Last updated: October 5, 2026 · The interest rate in the example is an illustration, not a quote.
USDA loans help low- and moderate-income buyers purchase homes in eligible rural and suburban areas, often with no down payment. Many buyers are surprised how close to major cities eligible areas can be.
How USDA guaranteed loans work
- No down payment for eligible borrowers and properties.
- Property must be in an eligible area, checked on the USDA eligibility map.
- Income limits: household income generally up to 115% of the area median income.
- Primary residence only.
- 30-year fixed rate only under the guaranteed program.
- Fees: a 1% upfront guarantee fee and a 0.35% annual fee.
Example: a $350,000 home
With 0% down, the 1% upfront fee is $3,500, financed into a loan of $353,500. At an example rate of 6.5% for 30 years:
| Monthly cost | Amount |
|---|---|
| Principal & interest | $2,234.36 |
| Annual fee (0.35%), first year | about $103.10 |
| Total before taxes and insurance | about $2,337.46 |
The annual fee is based on the average scheduled balance each year, so it falls slowly over time. It generally lasts for the life of the loan unless you refinance.
USDA vs. FHA vs. VA
- USDA annual fee (0.35%) is lower than FHA’s typical annual MIP (0.55%), and no down payment is needed, but location and income limits apply.
- FHA works anywhere and has no income limits but needs at least 3.5% down. See FHA vs. conventional.
- VA has no monthly mortgage insurance at all, for eligible service members and veterans. See VA loans explained.
Requirements to expect
- Stable, verifiable income and an acceptable credit history. USDA itself sets no minimum credit score, but many lenders look for a score around 640 or higher for streamlined approval.
- A debt-to-income ratio within program limits; see DTI explained.
- An appraisal confirming value and basic property standards; see home appraisals explained.
Compare monthly costs in our mortgage calculator, and plan for closing costs, which sellers can help cover.
Frequently asked questions
What is a USDA loan?
A USDA guaranteed loan is a mortgage backed by the U.S. Department of Agriculture for low- and moderate-income buyers purchasing a primary home in an eligible rural or suburban area. It can require no down payment.
What are the USDA loan fees in 2026?
USDA guaranteed loans charge an upfront guarantee fee of 1% of the loan, which can be financed, and an annual fee of 0.35% of the average unpaid balance, paid monthly.
What are the income limits for a USDA loan?
For the guaranteed program, household income generally cannot exceed 115% of the area median income. Limits vary by county and household size; check the USDA eligibility site.
How do I know if a home is in a USDA-eligible area?
Use the USDA property eligibility map on its website. Many small towns and suburban areas outside major cities qualify.
Sources: USDA Rural Development: Single Family Housing Guaranteed Loan Program; USDA eligibility site. Example calculations by ToolStackIA.
This article is for educational purposes only and is not financial advice. Loan programs, rates and rules change; confirm details with your lender or a HUD-approved housing counselor.