If you get your USDA home loan information elsewhere, double-check the publish date of the article to make sure that it's current.



If you've never heard of the USDA loan program, you're not alone. It's a niche product serving a fraction of the U.S. housing market, and most banks don't offer them. However, eligible suburban and rural home buyers can use it for 100%, no-money down mortgage financing.

The program's full name is the USDA Rural Development Guaranteed Housing Loan program. Most people call them "USDA loans", "Rural Housing Loans" or "Section 502 loans".

USDA loans are insured by the U.S. Department of Agriculture and the program's biggest feature is its option for "no money down" financing. Via the USDA, you can finance 100% of a home's purchase price while getting access to better-than-average mortgage rates.

Beyond that, USDA loans are similar to other common loan types. The repayment schedule is "normal", closing costs are standard, and there are never prepayment penalties to pay.  Where USDA loans are different, though, is with respect to its downpayment requirements and its simpler loan approval standards.

Rural loans can be used by first-time buyers and repeat home buyers alike. Homeowner counseling is not required to use the USDA program.


The Rural Housing Loan program is a product of the U.S. Department of Agriculture. It's partially funded by program borrowers. Similar to the Federal Housing Administration's FHA mortgage, the USDA uses homeowner-paid mortgage insurance premiums to keep the USDA home loan program going.

Since October 1, 2015, USDA mortgage insurance rates have been:

For purchases, 2.50% upfront fee paid at closing, based on the loan size

For refinances, 2.50% upfront fee paid at closing, based on the loan size

For all loans, 0.40% annual fee, based on the remaining principal balance

As a real-life example : A home buyer with a $100,000 loan size in Gonzales, Louisisana, would be required to make a $2,500 upfront mortgage insurance premium payment at closing, plus a monthly $33.33 payment for mortgage insurance.

USDA upfront mortgage insurance is not paid as cash. It's added to your loan balance for you.

USDA mortgage insurance rates are lower than those for a comparable FHA loans or conventional mortgages. FHA mortgage insurance premiums assess a 1.75% upfront mortgage insurance premium and charge as much as 0.8% in MIP annually. Conventional MI can be similarly high.

Even better, USDA mortgage rates are often the lowest among FHA mortgage rates, VA mortgage rates, and conventional loan mortgage rates.