What Is a USDA Loan?

A USDA loan, or a Rural Development Loan, is a mortgage program run by the United States Department of Agriculture (USDA) that helps to make homeownership more affordable in rural areas across the United States. USDA loans allow buyers to secure favorable rates and terms and make it possible to get a mortgage with zero down payment. 

To be eligible for a USDA loan, borrowers must meet certain criteria, including income thresholds that differ based on the property’s location. In addition, the property must adhere to USDA eligibility criteria, including being situated in a designated rural area as determined by the USDA.

Prospective homeowners considering a USDA loan begin the process by applying through a lender approved by the USDA. The lender will then evaluate the borrower’s eligibility factors, such as income and credit history. Upon approval, the USDA then provides a guarantee for a portion of the loan, minimizing the lender’s risk and enabling them to extend more favorable terms to borrowers.

Overall, USDA loans give individuals and families the opportunity to achieve homeownership in rural areas with minimal financial barriers, making them a valuable resource for promoting economic growth in these communities.

USDA Loan Requirements in California

If you’re eager to explore USDA loan requirements in California, it’s essential that you get a solid understanding to grasp the necessary qualifications fully. Initially, borrowers must comply with the overarching criteria outlined for USDA loans:

  • U.S. citizenship: Borrowers must be U.S. citizens or permanent residents.
  • Income limits: Borrowers must adhere to income thresholds established by the USDA, which fluctuate based on household size and geographic location.
  • Location limits: The property must be in a rural area, as defined by the USDA’s eligibility map. Income and location serve as fundamental criteria in assessing borrower eligibility.
  • Lender-specific criteria: Although there are overarching guidelines, lenders might enforce supplementary criteria like a minimum credit score, debt-to-income ratio (DTI), and proof of ample funds for closing expenses. These lender-specific mandates ensure that prospective borrowers have the financial capability to repay the loan, diminishing the lender’s risk.

Prospective borrowers should consult with a USDA-approved lender to understand all the requirements and determine their eligibility for a USDA loan in California.

Pros and Cons of USDA Loans

When it comes to deciding which loan is best for you, there are a few pros and cons of USDA loans to consider. 


Some of the primary benefits of USDA loans are as follows:

  • No down payment needed: A compelling aspect of opting for a USDA loan is the ability for borrowers to buy a house with no money down, making homeownership more attainable, especially for those who are looking to buy a house with low income. Removing the requirement for a sizable cash down payment significantly enhances accessibility to homeownership for individuals, opening doors to those who may have previously been excluded.
  • Competitive interest rates: Since USDA loans are government-backed, lenders assume less risk, which makes it easier for them to extend relatively low interest rates to borrowers.
  • Flexible credit requirements: USDA loans typically feature more forgiving credit score criteria than conventional loans, which can benefit borrowers with less-than-ideal credit histories.
  • No PMI required: Unlike many conventional loans, USDA loans don’t necessitate private mortgage insurance (PMI). Without paying PMI, this can lead to decreased monthly mortgage payments for borrowers.
  • No prepayment penalties: While many mortgages include penalties for early repayment, USDA loans offer the benefit of no prepayment penalties. This means that you have the flexibility to pay off your mortgage ahead of schedule without incurring any extra fees.
  • Streamline assist refinance: If you have an existing USDA loan and a lower rate is available, you can do a rate and term refinance without an appraisal, credit review, or income docs.


Like any mortgage product, USDA loans have their drawbacks. Here are some downsides you should consider before applying for a USDA loan in California:

  • Property location: Homes must be in USDA-eligible rural areas, which limits options for buyers who prefer urban or suburban settings. Homes must also meet other criteria, including size and safety standards. 
  • Income limits: To qualify for a USDA loan in California, you must meet income limits that vary based on the location you’re looking at. If you make more than the income limit in question, then you won’t be eligible for a USDA loan. 
  • Guarantee fees: While USDA loans don’t require standard PMI, they do require something similar to mortgage insurance, known as a guarantee fee. Guarantee fees involve both an upfront cost as well as an annual cost that add to your mortgage payments. In 2024, the USDA loan guarantee fee is 1% of the loan amount upfront, and .35% annually. 
  • Limited funding: USDA loans are available only if funds are available. At times, funds may be depleted, resulting in potential delays in loan approval.

While these drawbacks should be considered, USDA loans in California can still be an excellent option for prospective buyers who want to afford a home in rural areas. 

How to Qualify for a USDA Home Loan in California

In order to qualify for a USDA home loan in California, borrowers must meet the following requirements:

  • Must be a U.S. citizen.
  • Should have a minimum FICO score of 600.
  • Meet the minimum debt-to-income ratio.
  • Fall under the California USDA-adjusted annual household income limits, which is set at a maximum of 115% of the median income for your area, meaning your total household income cannot exceed this threshold. Income limits range from $111,000 for smaller households (1-4 members) to $314,400 for larger families (5 or more members).

Not sure whether you’re eligible for a USDA rural home loan in California? In that case, be sure to ask your lender about specific eligibility requirements and discuss whether this is the right mortgage for your needs. 

Apply for a USDA Rural Home Loan in California

Although a USDA loan isn’t the right choice for everyone, it can be a great option if you want to purchase a home in a rural area. If you want to learn more about USDA loans, compare financing options, and manage your finances, consider downloading the Griffin Gold app. By reviewing all of your options and assessing your eligibility for a USDA loan in California, you can make an informed decision when it comes to taking out a mortgage. 

Griffin Funding specializes in guiding prospective borrowers through USDA loan requirements, ensuring a clear comprehension of income and location criteria. As an experienced USDA lender in California, we’re prepared to help you achieve your dream of homeownership. Fill out an application today to take the first step towards becoming a homeowner.