USDA Loans

A USDA loan is a mortgage that's offered by private lenders and backed by the United States Department of Agriculture (USDA). USDA loans make buying or refinancing a home more affordable in rural and some suburban communities.

To be eligible for a USDA loan, the property must be located in an approved community. You can check whether or not a home is eligible by using the USDA's loan map. You will also need to meet credit, income, and financial requirements to get your loan application approved.

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USDA loans make financing a home more affordable. They have competitive interest rates, no required down payment for many homebuyers, and low guarantee fees. There are no loan limits, although there are income limits that may affect your eligibility for a USDA loan. There are also no prepayment penalties. Refinancing a USDA loan can be easier with the Streamline program, too.

USDA loan guarantee fees are often lower than the mortgage insurance premiums you'll pay with an FHA loan. However, USDA loans often have a higher minimum credit score requirement than FHA loans. Learn more about the differences between FHA loans and USDA loans.

To get approved for a USDA loan, the home you want to buy or refinance must be located in an eligible rural or suburban community. You'll also need to meet our credit, income, and financial requirements. These requirements include:

• Applying for a USDA loan. You'll have to fill out a mortgage application and submit credit, income, and financial documents that verify the income and asset information on the application.
• Meeting the minimum credit score. You'll typically need a credit score of 620 or higher to get approved for a USDA loan. 620 is the credit score Freedom Mortgage often requires.
• Meeting the income limits. The USDA loan program is limited to borrowers whose household income does not exceed a certain amount. These limits vary by state and county. To find out if your household income makes you eligible, visit the USDA income eligibility page.
• Financing a primary residence. You can only buy or refinance a primary residence with USDA loans. This is the home where you live most of the time. You can't use USDA loans to finance a second home, rental house, or investment property.
• Home appraisal. You'll need a home appraisal to make sure the property you want to buy meets USDA requirements. This includes ensuring that the home is safe and in good condition. The appraisal will also look at comparable homes in the area and compare their value.
• Paying the USDA guarantee fee. Guarantee fees are a type of mortgage insurance for USDA loans. The upfront guarantee fee is 1% of the loan amount. You'll typically pay this fee as part of your closing costs. There is also an annual fee of 0.35% of the average annual unpaid principal balance. You will pay this annual guarantee fee for the life of the loan.
• Paying closing costs. USDA loan closing costs can include lender fees, discount points, homeowners insurance, property taxes, and title fees, as well as the upfront guarantee fee.
• Having one USDA loan at a time. You are typically limited to buying or refinancing one home at a time with a USDA loan.

Although you aren't required to make a down payment to buy a house with a USDA loan, making a down payment might make sense for you. Making a down payment reduces the amount of your mortgage principal and can help you lower the cost of your interest payments.

The USDA loan map is an interactive map on the United States Department of Agriculture's website that allows you to research properties that may be eligible for USDA loans. You can enter the street address, city, and state of a property in the search box to determine if it is eligible for financing.

Note that the USDA states that the map's results do not guarantee a home will be eligible for a USDA loan. The final eligibility will be established after you complete your mortgage application. To research homes, visit the USDA loan map page.

The USDA rate we may be able to offer is personal to you. Your interest rate is affected by the type of loan you want, your credit score, your income and finances, as well as the current mortgage market environment. Freedom Mortgage may be able to offer you a rate that is lower—or higher—than the rate you see advertised by other lenders. Ask us today about the USDA loan rate we can offer you. Call a Loan Advisor at 877-220-5533.