Is a USDA Loan Right for You?

3 Min Read
Published Nov. 7, 2022
Woman feeding dogs in front yard with rural house in background.
Written By
Reviewed By

Loans backed by the Department of Agriculture are available to low- and moderate-income borrowers who want to buy in rural areas. If you are eligible for a USDA loan, you’ll want to understand how they differ from other types of mortgages, as well as their benefits and drawbacks.

Pros and Cons of USDA Loans

Here’s a look at the pros and cons of USDA loans:

USDA Loans: Pros and Cons

Helps buyers in rural areas become homeowners.Only available in certain locations.
No down payment minimum.Income limit.
Lower mortgage insurance premium.Upfront and annual guarantee fees.
Competitive interest rates.The home must be your primary residence.
Multiple ways to pay closing costs.You must be unable to get a conventional loan without private mortgage insurance.

USDA Loans vs. FHA Loans

Because USDA loans and Federal Housing Administration loans both are backed by government agencies, they have different rules and eligibility requirements.

Differences Between USDA Loans and FHA Loans

USDA LoansFHA Loans
Usually cheaper than FHA loans.Often more expensive than USDA loans.
No down payment requirement.Low down payment requirement.
Income requirements.No income requirement.
No credit score requirement.Need a credit score of at least 500.
Upfront and annual guarantee fees.Mortgage insurance required.
Location restrictions.No location restrictions.

USDA Loans vs. Conventional Loans

Because USDA loans are backed by the government, the lender’s risk is reduced in the event that the borrower defaults. As a result, USDA loans have more generous eligibility requirements for borrowers, and mortgage lenders can offer lower interest rates compared with conventional loans.

Differences Between USDA Loans and Conventional Loans

USDA loansConventional loans
No down payment requirement.Low down payment requirement.
Only available in certain areas.No location limits.
Upfront and annual guarantee fees.Private mortgage insurance if your down payment is less than 20%.

FAQ: Is a USDA Loan Right for You?

Here are the answers to frequently asked questions about choosing a USDA loan.


Ready for more learning?

Here’s some other helpful articles

Related Articles

**itsHome, a LMB Mortgage Services, Inc. company, is not acting as a lender or broker. The information provided by you to itsHome is not an application for a mortgage loan, nor is it used to pre-qualify you with any lender. If you are contacted by a lender or broker advertising within our network, your quoted rate may be higher depending on your property location, credit score, loan-to-value ratio, debt-to-income ratio, and/or other factors. itsHome does not offer its matching services in all states. This loan may not be available for all credit types, and not all service providers in the itsHome network offer this or other products with interest-only options. The information that we provide is from companies which itsHome and its partners may receive compensation. This compensation may influence the selection, appearance, and order of appearance on this site. The information provided by itsHome does not include all financial services companies or all of their available product and service offerings. We use cookies to track data and provide you with the best possible experience. By proceeding you consent to the use of these cookies. For more information, see our Privacy Policy.

itsHome, a LMB Mortgage Services, Inc. company NMLS #167283,