USDA Loans

The USDA Single Family Housing Guaranteed Loan Program is a zero-down mortgage program backed by the U.S. Department of Agriculture. Despite the “agriculture” name, it has nothing to do with farming — it’s a tool for expanding homeownership in less-densely-populated areas.

USDA refinancing is available for qualifying existing USDA loans; it is not a general cash-out refinance program.

Program eligibility does not by itself establish lender availability. We’ll confirm which financing options are available for your property, occupancy and circumstances.

1. Property location. Many rural areas and some suburban neighborhoods qualify, but eligibility is address-specific. We’ll check the property against USDA’s current eligibility map.

2. Household income. Eligibility is based on adjusted annual household income, generally limited to 115% of area median income. Household size, exclusions and allowed deductions matter; income used to qualify for repayment is evaluated separately.

USDA’s Single Family Housing Guaranteed Loan Program is primarily a zero-down-payment purchase option for eligible primary residences in USDA-designated rural areas. It is not limited to first-time buyers, and the property can include eligible detached homes, attached homes, condos, PUDs, modular homes and qualifying manufactured homes.

The program also has an income-eligibility test. For the Guaranteed program, adjusted household income generally cannot exceed 115% of the area median income for the applicable area. That calculation is different from the income used to qualify for the mortgage itself. USDA separately analyzes repayment income, meaning the stable and dependable income of the borrowers who will actually be obligated on the loan.

Qualification also depends on how the loan is underwritten. USDA uses its Guaranteed Underwriting System, or GUS. For manually underwritten purchases, the standard benchmarks are generally 29% for the housing payment and 41% for total debt, while a GUS Accept can approve a file above those ratios without requiring a manual debt-ratio waiver. That is why someone should not assume they are ineligible merely because an online DTI calculator puts them above 29/41.

And “zero down” does not necessarily mean zero cash needed at closing. USDA allows 100% financing and can even permit eligible closing costs to be financed when the appraised value supports them, but the borrower can still have prepaid taxes and insurance, closing costs that are not financed or covered by credits, appraisal differences, or other transaction expenses.

USDA evaluates credit history through its underwriting requirements; it does not set one universal minimum credit score. Lenders may apply their own requirements.

For fiscal year 2027, which began October 1, 2026, USDA’s Guaranteed program charges a 1.00% upfront guarantee fee and a 0.35% annual fee on both purchase and refinance transactions.

The 1% upfront guarantee fee can generally be financed into the loan instead of being paid entirely in cash. USDA also permits it to be paid from the borrower’s funds or eligible seller concessions. Because USDA permits financing of the upfront fee above the normal 100% appraised-value limit, a USDA mortgage can actually start slightly above the property’s appraised value when the guarantee fee is financed.

The 0.35% annual fee works differently. It is calculated from the loan’s average scheduled unpaid principal balance and is typically collected from the borrower through the monthly mortgage payment. Because the balance declines over time, the dollar amount of the annual fee also generally declines. The annual fee applies for the life of the guaranteed loan rather than automatically terminating at an 80% or 78% LTV threshold like conventional PMI can.

If the loan amount before the guarantee fee is $300,000 and the entire 1% fee is financed, the total loan would be about $303,030, including a guarantee fee of about $3,030. The 0.35% annual fee is not simply $1,050 every year forever because USDA calculates it using the scheduled declining balance rather than the original balance for the entire term.

USDA’s 0.35% annual fee is lower than the 0.55% FHA annual MIP used in this comparison. The total payment still depends on the rate, loan amount and other costs.