USDA

USDA loans are geared towards lower income buyers with credit scores in the mid-600s or higher, and who live in areas deemed rural by the U.S. Department of Agriculture, the government agency that guarantees the loans. They are for buyers who often have livestock (but not required). They don’t require down payments which eliminates a substantial barrier to home ownership that many buyers encounter. There are maximum income limits based upon family size.

Believe it or not, 97% of the United States is USDA loan eligible, including many suburban areas near major cities, so don’t be discouraged thinking your desired area may not qualify. Any area with a population of 20,000 or less (or 35,000 or less in special cases) can be an eligible area. Some areas are closer to major cities than you might imagine! 

Allowing borrowers to get mortgages with $0 down, means they can hold onto their cash for other purposes such as improvements or emergency savings. USDA loan interest rates, like those for VA loans, are typically lower than those for conventional or FHA loans.

Like FHA loans, USDA loans have an up-front fee (guarantee fee) of the loan amounts added to them, so this fee doesn’t have to paid out-of-pocket. Rather, an annual fee is prorated and paid monthly with the mortgage payments. Both of these fees are also required when homes are refinanced.