Top 20 USDA Mortgage Questions and Answers

1. What is a USDA Mortgage?

A USDA mortgage is a home loan offered by the United States Department of Agriculture to support homeownership in designated rural and suburban areas. It offers low interest rates and no down payment. Click here to see if you qualify.

2. Who is Eligible for a USDA Loan?

Eligibility is based on income, credit history, and the property being located in a USDA-eligible area. Applicants must meet income eligibility limits and demonstrate the ability to repay the loan.  Click here to see if you qualify.

3. What are the Income Limits for USDA Loans?

Income limits vary by location and household size, generally capped at 115% of the median income for the area. The USDA provides an online tool to check local income limits.  Click here to see if you qualify.

4. What Types of Properties Qualify for USDA Loans?

Eligible properties must be in a USDA-designated rural area. They include single-family homes, condos, and manufactured homes that meet certain conditions.  Click here to see if you qualify.

5. Do USDA Loans Require a Down Payment?

No, one of the significant benefits of a USDA loan is that it offers 100% financing, meaning no down payment is required.

6. What is the Minimum Credit Score for a USDA Loan?

While the USDA does not set a minimum credit score, lenders typically require a score of at least 640 to qualify for automated underwriting processes.  Click here to see if you qualify.

7. Are There Closing Costs with USDA Loans?

Yes, there are closing costs, but they can often be rolled into the loan amount or paid by the seller.

8. What is the USDA Guarantee Fee?

The USDA charges a 1% upfront guarantee fee, which can be rolled into the loan amount, and an annual fee of 0.35% of the loan balance, which is added to monthly payments.

9. Can I Refinance a USDA Loan?

Yes, the USDA offers streamlined refinancing options for homeowners with existing USDA loans.  Click here to see if you qualify.

10. How Long Does the USDA Loan Process Take?

The loan process can vary but typically takes between 30 to 60 days from application to closing.  

11. Is Mortgage Insurance Required for a USDA Loan?

While traditional mortgage insurance is not required, the USDA charges an upfront guarantee fee and an annual fee that serves a similar purpose.

12. Can I Buy a Fixer-Upper with a USDA Loan?

USDA loans typically require the property to be in move-in ready condition. However, the USDA does offer a specific loan program for home repairs and renovations.  Click here to see if you qualify.

13. How Do I Apply for a USDA Loan?

You can apply through a USDA-approved lender. The first step is to check if you and the property are eligible.  Click here to see if you qualify.

14. What are the Repayment Terms for USDA Loans?

USDA loans offer 30-year fixed-rate terms, ensuring stable and predictable monthly payments.

15. Can I Use a USDA Loan to Buy Land?

No, USDA loans are intended for purchasing existing homes or new construction homes that meet specific criteria.

16. What Makes USDA Loans Different from FHA and VA Loans?

USDA loans require no down payment and are specifically for rural and suburban properties. Unlike FHA loans, they don’t require mortgage insurance premiums, and unlike VA loans, they are available to a broader range of people not just veterans.  Click here to see if you qualify.

17. Are There Any Prepayment Penalties on USDA Loans?

No, there are no prepayment penalties on USDA loans, allowing borrowers to pay off their loan early without additional fees.

18. Can the USDA Loan Program Be Used to Purchase Investment Property?

No, USDA loans are strictly for primary residences. Investment properties do not qualify.

19. What Happens if I Sell My Home Purchased with a USDA Loan?

You can sell your home at any time. If you sell it for a profit, there are no restrictions on the use of those funds.  Click here to see if you qualify.

20. Is There a Limit to How Much I Can Borrow with a USDA Loan?

Loan limits are not set by the USDA program itself but by your debt-to-income ratio and ability to repay the loan. Lenders will evaluate your income and other debts to determine the loan amount you qualify for.  Click here to see if you qualify.