Quick answer
A USDA loan — formally a Single Family Housing Guaranteed Loan — is a mortgage from an approved private lender that USDA Rural Development guarantees, letting eligible buyers finance the full price with 0% down. It is limited to homes in eligible rural areas and to households earning no more than 115% of the area median income.
Key facts
Two eligibility tests: place and income
The address must fall in an area USDA classes as eligible — mostly rural places and small towns — which you can check on USDA’s eligibility map. The income test counts the whole household, not just the people on the loan. The home must be your primary residence. Because USDA guarantees 90% of the loan to the lender, the program can do without a down payment. Separately, USDA lends directly to low- and very-low-income buyers through its Direct loan program.
What the guarantee costs
Instead of mortgage insurance, you pay an upfront guarantee fee of 1%, which can be financed, and an annual fee of 0.35% collected in monthly payments. On a $250,000 loan, that’s $2,500 upfront and about $875 in the first year, roughly $73 a month, against about $115 a month of FHA mortgage insurance premium at 0.55%. See the USDA loans guide for the debt ratios and how to check an address.
Related terms
- Down payment
- FHA loan and VA loan, the other government-backed options
Sources
- USDA Rural Development — USDA guaranteed loan upfront guarantee fee; USDA guaranteed loan annual fee (FY2026)
- HUD Mortgagee Letter 2023-05 — FHA annual MIP, 30-year loan, more than 95% LTV (Feb 22, 2023)
- USDA Rural Development — USDA guaranteed loan down payment; USDA guaranteed loan income limit (share of area median income); USDA guaranteed loan: loan note guarantee to approved lenders (Oct 28, 2026)
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.