USDA loans are some of the most affordable mortgages on the market. But are rates high?
Today’s USDA mortgage rates
See below for average USDA home loan rates today as reported by Optimal Blue, a mortgage software company. These rates better represent one you may receive, since they are based on real borrower applications across the U.S., not perfect scenarios.
USDA loan rates are often lower than conventional rates
You might think that a zero-down mortgage would come with sky-high rates. But USDA offers lower rates than conventional loans do in many cases.
This is due to the USDA loan’s mission. The government created this program to encourage homeownership in non-urban areas. As such, these loans enjoy strong backing from the federal government. This all but eliminates risk for lenders, who pass along savings to the borrower.
USDA loan eligibility
Not everyone is eligible for a USDA loan. Here are some basic requirements:
- You must purchase a property designated as “rural” (many suburban areas are eligible; check maps here)
- You have a maximum debt-to-income ratio of 41%
- Your total household income including those not on the loan is less than $110,000 per year. Income limits are higher in more expensive locations
- Credit score of about 600+, although some lenders allow lower scores
- You don’t have adequate funds to put down 20% plus closing costs
- You don’t have other adequate housing in the area
- You do NOT have to be a first-time buyer
If you meet the above requirements, there’s a good chance you could qualify for USDA.
Do I have to get my USDA loan directly from the government?
There are two types of USDA loans.
For Direct loans, you must apply directly with the government and meet even stricter criteria. Most people are not eligible.
Guaranteed USDA loans represent the vast majority of USDA mortgages. They are issued by mortgage lenders. The lender verifies that the loan meets USDA criteria and works with the borrower through the process. The government only double-checks the file prior to closing.
These USDA loans are the simplest and fastest to qualify for so you can become a homeowner sooner.
Apply for USDA
USDA loans have turned millions of renters into homeowners even when they thought they could never afford it, thanks to low mortgage rates and zero down payment.