USDA Loans: Rates, Terms and Eligibility
USDA loans come with affordable interest rates, no down payment and no mortgage insurance. While you’re required to buy a home in an eligible rural area and meet certain income limits to qualify, this loan program aims to make homebuying more affordable for low-to-moderate-income borrowers.
Here’s what you need to know before applying for a loan guaranteed by the U.S. Department of Agriculture (USDA).
- USDA loans are meant to help low- to moderate-income buyers become homeowners.
- USDA loans don’t require a down payment or mortgage insurance and have affordable interest rates compared to conventional loans.
- To qualify for a USDA loan, you must be willing to purchase a home in an eligible rural area.
How do USDA loans work?
1. Make sure your home is eligible
Once you identify a property you want to purchase, you’ll need to confirm it’s in an eligible area.
2. Apply for your USDA loan
Now, you can apply for a USDA loan. Depending on the loan type, you’ll either apply through a USDA-approved lender or directly with your local USDA Rural Development office (the application itself can be done online).
3. Close on your home loan
Once it’s confirmed that you meet the income and other loan requirements, you can proceed to closing.
You must pay an upfront guarantee fee (1% of the loan amount) and an annual fee (0.35%), but in exchange you can enjoy very competitive interest rates and no down payment requirement. You may also qualify for a loan term longer than 30 years. For these reasons, USDA loans can have very affordable monthly payments.
Types of USDA loans
There are three types of USDA loans available to borrowers who qualify for the program: direct loans, guaranteed loans, and construction loans. They all feature no down payment or mortgage insurance requirements, but there are a few distinct differences between them.
| USDA loan type | Best for … | Issued by | Interest rate | Income requirements | How to apply |
|---|---|---|---|---|---|
| USDA direct loan | Low- to very-low-income borrowers looking to purchase or improve a home. | USDA | 5.13% | No more than 80% of the median household income for your area | Directly with the USDA through a local office (the application itself can be done online) |
| USDA guaranteed loan | Low- to moderate-income borrowers looking to purchase or improve a home. | USDA-backed lenders | Varies by lender | No more than 115% of the median household income for your area | Through a USDA-approved lender |
| USDA construction loan | Low-to-moderate-income borrowers looking to build a home | USDA-backed lenders (loans are combined with a USDA-guaranteed loan) | Varies by lender | No more than 115% of the median household income for your area | Through a USDA-approved lender |
The USDA sets its income limits by county. You can find your area’s median household income by using the agency’s income eligibility map. Just click on your state to see a list of income limits broken down by county.
If you’d like more detailed information on these loan types, click the dropdowns below.
Low-income and very-low-income borrowers who are interested in purchasing a home in an eligible rural area may qualify for a loan through the Section 502 Direct Loan Program. This program is meant to help those who are without safe housing or can’t qualify for a loan through more traditional means, so it has some unique features, including:
- Interest rate: The program’s mortgage interest rates are currently capped at 5.125%, but they can go as low as 1% following payment assistance.
- Repayment term: The loan term on a USDA direct loan can be extended up to 38 years to make mortgage payments more affordable.
The Section 502 Guaranteed Loan Program — also known as USDA guaranteed loans — helps low- to moderate-income borrowers purchase homes in eligible rural areas. Unlike USDA direct loans, approved lenders offer USDA guaranteed loans rather than the USDA itself.
Instead, the USDA guarantees 90% of the loan for participating lenders, which means that they can offer more favorable loan terms, including:
- Repayment term: All USDA guaranteed loans are 30-year fixed-rate mortgages.
- Credit score: Borrowers won’t have to meet any minimum credit score requirements set by the USDA. However, your lender likely has one.
Low- to moderate-income borrowers looking to build a home in a rural area can use a USDA construction loan for the task. This program combines a USDA guaranteed loan with a construction loan in one, so you won’t have to refinance your mortgage once construction is complete.
How to qualify for a USDA home loan
Here’s a closer look at the specific eligibility requirements needed to qualify for a USDA loan.
| Citizenship | Must be a U.S. citizen, U.S. noncitizen national or qualified nonresident |
| Minimum credit score | None, though many lenders recommend 640 |
| Maximum DTI ratio | 41% |
| Occupancy | Must be for a primary residence |
| Property type | Detached, attached, condos, modular, manufactured or planned unit developments (PUDs) |
| Location | The property must be located in an eligible rural area |
Wondering how to determine if your property qualifies? Here’s our guide on how to use the USDA loan map.
USDA loans compared to conventional loans
| Requirement | USDA | Conventional |
|---|---|---|
| Down payment | 0% | 3% |
| Credit score | No minimum, 640 is standard | 620 |
| Fees |
| Private mortgage insurance: 0.14% to 2.33% (with less than 20% down) |
| DTI ratio | 41% | 45% |
| Interest rates | Lower | Higher |
| Loan terms | Up to 38 years | Up to 30 years |
Want to know where you stand with credit? Get your score on LendingTree Spring and receive tips on how to improve it.
The best lender for you depends on your needs and financial profile, but will have to be an active USDA lender. Or, if you’re shopping for a USDA construction loan, look for participating lenders in your area.
The smartest way to choose a lender is to comparison shop — doing so can save you an average of $80,000 over the life of your loan. If you’re unsure where to begin, check out the top USDA lenders in your state.
How to get the best USDA loan rates
Getting your finances in order is the best way to improve your odds of receiving the best USDA loan rates. Here are a few ways to strengthen your financial standing.
- Work on your credit score. The higher your credit score, the better your interest rates — so take steps to boost your credit score before applying for a USDA loan.
- Make a down payment. While USDA loans don’t require a down payment, putting money down shows the lender you’re serious about repaying the loan as agreed.
- Tackle current debt. Paying off debt can reduce your debt-to-income (DTI) ratio — which lenders love — and also show that you have the funds available to repay your loan.
- Compare lenders. It’s important to shop around with several lenders to compare interest rates, fees, closing costs and loan terms and find the best deal.
The average rate for a 30-year fixed USDA loan is 6.313% as of Q3 2025.
According to Optimal Blue’s 30-Year Fixed Rate USDA Mortgage Index, retrieved from the Federal Reserve Bank of St. Louis (FRED).
For comparison, the average conventional loan rate is 6.57%.
Keep in mind that there are a number of factors that determine a mortgage rate, including your credit history, loan term and the broader economy. Interest rates for USDA direct loans are currently 5.125%, while interest rates for USDA guaranteed loans vary by lender.
Frequently asked questions
Yes, loans financed or guaranteed by the USDA can be refinanced. Talk to your lender to get a better sense of the options available to you.
If you meet the eligibility requirements and want to live in a rural area, USDA loans can be a smart way to buy a home. However, it’s important to shop around and compare loan offers to ensure that the USDA loan program is the most financially advantageous option for you.
Yes, you can use a USDA guaranteed loan to purchase a manufactured home that’s already on a plot of land. Or, if you’d like to purchase land and then place a manufactured home on it, you can do so using a USDA combination construction-to-permanent Loan.
View mortgage loan offers from up to 5 lenders in minutes