What is a USDA Mortgage?
A USDA home loan is a zero down payment mortgage for eligible rural homebuyers. USDA loans are issued through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture.
There are three USDA home loan programs:
Loan guarantees: The USDA guarantees a mortgage issued by a participating local lender — similar to an FHA loan and VA-backed loans — allowing you to get low mortgage interest rates, even without a down payment. If you put little or no money down, you will have to pay a mortgage insurance premium, though.
Direct loans: Issued by the USDA, these mortgages are for low- and very low-income applicants. Income thresholds vary by region. With subsidies, interest rates can be as low as 1%.
Home improvement loans and grants: These loans or outright financial awards permit homeowners to repair or upgrade their homes. Packages can also combine a loan and a grant, providing up to $27,500 in assistance.
Advantages of USDA loans: