USDA Loans: How They Work, Benefits, & Eligibility

What Is a USDA Loan?

USDA rural development home loans (RD 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 RD 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: USDA direct loans are 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 USDA direct loans, including that you are very-low income and unable to obtain financing anywhere else. USDA direct loans also come with regional loan limits, unlike USDA guaranteed loans.

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.

What Kind Of Property Can You Buy With a USDA Loan?

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 use a USDA loan to buy a second home or vacation home. If you’re interested in purchasing an investment property, take a look at the investment property loans we currently offer.

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.

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 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 adjusted 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 a 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 Loan Income Limits in 2025

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: $112,450
• 5-8 member household: $148,450

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:

1. Submit an application to your lender to get pre-approved
2. Find your property and verify that it meets the USDA guidelines
3. Complete a purchase agreement
4. Provide us with all the documentation we need to complete your loan
5. Sign all loan documentation
6. 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 close on your RD loan and 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 designed to suit a wide variety of 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, get started online or call us at (855) 394-8288 to speak with a loan officer. 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.