What Are USDA Loans?

USDA loans are a government-backed mortgage program that benefits borrowers hoping to purchase a home in a rural area. Although not everyone knows about this type of mortgage, it can be a great way to secure affordable home financing if you live in an eligible area. Below we go into more detail about what this type of mortgage entails.  

What Is a USDA Loan?

USDA Rural Development home loans are mortgages for homes that are located in designated rural areas. These loans are guaranteed by the United States Department of Agriculture (USDA), which is why you are able to secure one without a down payment. However, the home loan itself may be provided by a mortgage lender. 

In addition to helping lower-income home buyers, rural development loans are designed to help bolster communities in rural areas. 

USDA Direct vs. Guaranteed Loans

There are two different home loan options: 

  • USDA Guaranteed Loans: In these instances, USDA loans are issued through a lender—this is the type of USDA home loan provided by Griffin Funding.
  • USDA Direct Loans: In other cases, the home loan is issued directly through the USDA. While this might sound like the simpler solution because it comes directly from the source, there are actually quite a few restrictions for this option—including that you are very-low income and unable to obtain financing anywhere else. 

When you apply for your USDA guaranteed loan through Griffin Funding, we strive to make the process as simple and streamlined as possible; in most cases we can complete everything within 30 days or less. 



While there are limitations, many homes fall into the requirements that the USDA sets. You can purchase a few different kinds of property by using a USDA loan, including: 

  • Newly built homes
  • Manufactured or modular homes
  • Condos and townhouses 
  • Short sales and foreclosed homes 
  • Certain properties that are no longer in commercial use (property with acreage, barns, silos, etc.) 

USDA home loans cannot be used for investment properties or other income-producing properties. Additionally, you cannot apply a USDA home loan to a secondary residence or rental or vacation homes. 

Do USDA Loans Have PMI?

No, USDA loans do not require PMI (private mortgage insurance). However, that does not mean that there is no mortgage insurance required at all. Instead of PMI, there are two guarantee fees that must be paid: 1% of the loan amount upfront (can be financed) and .35% monthly.

USDA Loan Benefits

The primary benefit of a USDA home loan is that it makes it possible for low-to-middle-income individuals or families to purchase a home with zero down. However, there are many benefits to acquiring a USDA loan for your new home, including:

Top Benefits of USDA Home Loans

  • No down payment required: USDA loans allow for 100% financing, so borrowers can minimize the upfront costs associated with buying a home. 
  • Flexible credit score requirements: Borrowers can qualify for a USDA loan with a FICO score as low as 600. 
  • Relatively low interest rates: Since USDA loans are backed by the government, lenders can afford to offer exceptionally low interest rates to borrowers in many cases. 
  • More flexible guidelines: Even if you’ve gone through bankruptcy or foreclosure, you can get a USDA loan as long as three years have passed. 
  • Affordable mortgage insurance: USDA loans come with a low upfront guarantee fee of 1% and an annual fee guarantee fee (paid monthly) of 0.35%.

If a USDA rural development loan isn’t suited to your circumstances or desired home location, we offer a variety of home loans including FHA first-time home buyer loans and other conventional home loans.

USDA Loan Requirements

Although USDA loans offer a lot of benefits, they do come with a set of requirements that must be met in order to qualify. These requirements relate to the location and type of property you’re purchasing as well as your income. Learn more about USDA loan requirements below. 

USDA Loan Requirements for Borrowers

Like any type of home loan, USDA loans have their own set of eligibility requirements. First and foremost, the property must be located in a qualified rural area. Some of the other important aspects of USDA eligibility include:

Important Eligibility Factors

  • U.S. citizenship or permanent residence
  • Your adjustable income cannot exceed 115% of the area’s median income for your family size 
  • Dependable source of income (needs to be verifiable) 

In addition to USDA loan requirements, each lender will have their own qualification guidelines. To qualify for USDA mortgage with Griffin Funding, borrowers must meet the following requirements: 

  • 600+ FICO score 
  • At least 3 years or longer since a bankruptcy or foreclosure 
  • Income falls below the regional limit
  • Approved debt-to-income (DTI) ratio 

If you’re unsure whether you qualify for a rural development loan, speak to one of our loan officers today by calling (855) 394-8288.

USDA Income Limits and Credit Requirements

The USDA enforces certain income limits to keep the program exclusive to those who they feel truly need financial assistance. The general USDA income limits are as follows:

Household Income Limits (in most counties)
  • 1-4 member household: $110,650
  • 5-8 member household: $146,050

However, it’s important to note that these are not set in stone, often due to regional differences. More specifically, your income cannot be greater than 115% of the area’s median income for your family size. When determining your income, the USDA evaluates your income using four calculations to determine your eligibility. 

While the USDA does not impose credit requirements, lenders typically do. At Griffin Funding, we strive to make our requirements as flexible as possible. If you are applying for a USDA home loan, you may be able to qualify with a credit score as low as 600.

USDA Loan Eligibility Map

While you might automatically assume that the rural areas that are covered by this loan are undesirable and out of the way, there may actually be more eligible areas than you’d expect, including some suburban areas. 

It’s important to keep in mind that if you’re in the early stages of looking for a home, the property eligibility areas may change from year to year. You can use the Official USDA Eligibility Map to get a general idea of rural areas that qualify. You might be surprised by what areas are classified as rural.

To check a specific address, you can also use the USDA address verification tool.

USDA Property Eligibility

In addition to location requirements, the USDA has certain criteria that a property must meet in order to be considered for one of these home loans, including:

  • Must be in a designated rural area
  • Must be a single-family home 
  • Must be used as your primary residence
  • Must be structurally sound, functionally adequate, and in good repair

There are many factors that are considered when classifying a rural area for the USDA’s purposes. While you can use these guidelines and the property eligibility map to help steer your search, the final say is up to the USDA when determining whether a certain property qualifies. An appraisal will ultimately be performed on the home to ensure that it meets all the requirements.

What States Are USDA Loans Available in?

Homeowners have access to the USDA loan program depending on their state and the lender. Griffin Funding is proud to offer USDA loans in many states across the U.S. 

Find your state and apply for a USDA mortgage today:


How to Apply for a USDA Loan

With the help of a seasoned loan specialist, applying for a USDA loan is fairly straightforward: 

  • Submit an application to your lender to get pre-approved
  • Find your property and verify that it meets the USDA guidelines 
  • Complete a purchase agreement 
  • Provide us with all the documentation we need to complete your loan 
  • Sign all loan documentation 
  • Finalize and close your USDA home loan 

While this might seem like a lot of steps, we typically complete this process in under 30 days, so you can purchase your home as soon as possible. 

Why Would the USDA Deny a Loan?

The USDA may deny a home due to the following factors: 

  • Your income: You may be denied if your income is too high for the program, it is not verifiable, or you have undisclosed debt.
  • Employment status: If your employment situation changes during the application process, the USDA may not consider your income “reliable”.
  • Changes to credit and debt situations: If your credit score meets the requirements, but circumstances change and bring your score below the threshold, you may no longer qualify. Additionally, if you suddenly start accumulating more debt, it may change your DTI. 
  • The property: If the property that you want to buy does not meet the requirements or is not in a designated zone, you cannot get approved with that property. 

If you do not qualify for a USDA mortgage, that does not mean you have to give up your dreams of homeownership. At Griffin Funding, we offer a diverse range of mortgage products that are designed to suit the needs of diverse borrowers, meaning that it’s likely one of our knowledgeable loan specialists will be able to help you find a home loan that suits your needs. 

Apply for a USDA Mortgage Today

If you’re ready to move forward with applying for a USDA mortgage, submit an application online or call us at (855) 394-8288 to speak with a loan officer and get the process started. We are dedicated to helping our customers secure their mortgage with a straightforward process and positive experience. 

If you want to start financially preparing for homeownership, we also offer resources to help. Download the Griffin Gold app to manage your finances, access smart calculators, compare mortgage options, and get personalized support from one of our mortgage professionals. 

Frequently Asked Questions

Is it a good idea to get a USDA loan? 

If you’re looking to buy a primary residence in a rural area, then it’s hard to go wrong with a USDA loan. USDA rural development loans provide borrowers with a lot of valuable benefits. This type of financing is budget-friendly and allows borrowers to lock in interest rates that are hard to beat. 

With that being said, USDA loans aren’t for everyone. If you want to live in or near a major city, then this type of financing probably won’t work for you. Additionally, if you’re a high earner, then you may be ineligible for a USDA loan due to the program’s income limits. 

How much does it cost to get a USDA loan? 

Because USDA loans allow for no down payment, the upfront costs of getting this type of financing are relatively low. But, like with any home financing option, there are some costs you have to account for in order to get a USDA loan. These costs may include:

At the end of the day, when taking out a USDA loan you should expect to pay around 2% to 6% of the home’s purchase price in closing costs. 

Can I get a USDA loan if I’m self-employed? 

Yes, you can get a USDA loan if you’re self-employed as long as you meet all of the USDA loan requirements. You will still need to provide some form of income verification so that the lender can ensure you fall within the program’s income limits.

Keep in mind that if you are self-employed, this can make getting approved for a USDA loan slightly more complicated. As a result, the processing time for your loan application may take a little more time than usual.