USDA Home Loans: What Are They? Who Qualifies?

There are all kinds of support programs out there for prospective first-time homebuyers—sometimes from organizations and institutions that you would least expect.

The US Department of Agriculture (USDA) is one such example.

Their USDA Home Loan Program supports rural homebuyers and others with aid that can drastically increase your purchasing power, particularly if you’re low-income and deal with economic challenges in your day-to-day life.

Let’s dive in and learn more about this program, as well as the requirements for participating in it.

About the Rural USDA Home Loan Program

The USDA’s Rural Development Guaranteed Housing Loan Program, known as the USDA Loan Program for short, is a special mortgage assistance program designed to “improve the economy and quality of life in rural America.”

The program is varied in its specific goals, but offers three distinct opportunities geared toward prospective and current homeowners:

  1. Direct loans for prospective homebuyers with low incomes
  2. Home improvement loans (and no-strings-attached grants) that allow recipients to make upgrades to their respective properties
  3. And finally, loan guarantees—offered in partnership with participating local lenders—that give buyers access to low interest rates on their mortgages

As mentioned above, the direct loans for lower-income families are geared toward applicants who face insurmountable financial challenges to home ownership.

These direct loans are for homes across the United States, from South Carolina to Hawaii; accordingly, the exact amounts associated with each loan fluctuate depending on the area that you’re buying your home in, since real estate prices differ so dramatically from region to region.

Regardless of where you’re buying, though, the amount that USDA Home Loan recipients get falls within the $100,000 to $500,000 range.

USDA Home Loan Requirements

There are a number of eligibility requirements one must meet in order to qualify for the USDA's Home Loan Program.

For one thing, the home you’re purchasing has to be in a rural area—not in a densely populated city. (For context, the USDA defines “rural” areas as places with less than 20,000 permanent residents.)

There is some flexibility on this front, though, as homes in suburbs have occasionally qualified, depending on the location.

A few other requirements:

  • The home must be your primary residence—meaning, you can’t use this grant program to purchase a vacation home or rental property
  • Depending on your lender, you may need a credit score of at least 640
  • You will need to be gainfully employed with a steady income stream proven through recent tax returns

Are you a qualified first-time homebuyer interested in learning more about the USDA Home Loan Program? Or in starting an application? Explore more eligibility requirements in detail on the USDA’s website.

Good luck with your application!