What Is a USDA Loan? Am I Eligible for One?

USDA loans are zero-down-payment mortgages that can open paths to homeownership for rural and suburban home buyers.
Taylor Getler
By Taylor Getler 
Updated
Edited by Alice Holbrook Reviewed by Michelle Blackford
2019-home-buyer-report

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A USDA home loan is a zero-down-payment mortgage for home buyers in eligible towns and rural areas. USDA loans are guaranteed by the USDA Rural Development Guaranteed Housing Loan Program, a part of the U.S. Department of Agriculture. Most USDA loans are issued by partner lenders, though the department can grant them directly to qualified borrowers with incomes below a certain limit.

In addition to having no down payment requirements, USDA home loans often also have lower rates than conventional mortgages because the government is taking on the risks associated with lending. This is true even when the USDA issues the loans. For example, on Jan. 1, 2024, the government agency set the interest rate for mortgages issued directly by the USDA at 5.125%. By comparison, the average interest rate for a conventional 30-year mortgage was about 6.3% that day.

And USDA loans don’t require borrowers to pay for traditional private mortgage insurance, or PMI. 

USDA loans can be a great tool to unlock homeownership for qualified borrowers. However, buyers have to meet certain requirements, including purchasing property within specific areas outlined by the agency. 

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