---
title: What Are USDA Home Loans?
description: USDA home loans are mortgage loans for low-income borrowers in rural areas. In order to qualify, you must meet certain requirements.
---

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# [What Are USDA Home Loans?](https://www.contourmortgage.com/news/what-are-usda-home-loans)

 Written by [Contour Mortgage](https://www.contourmortgage.com/news/author/contour-mortgage) | Feb 22, 2017 10:15:38 PM

USDA home loans are available to low and very low-income borrowers in rural areas. If you aren't able to qualify for a traditional mortgage, you may be eligible for the USDA home loan program.

Here's some more information if you are interested in obtaining this type of mortgage loan:

### First, what is considered a rural area?

A rural area is defined as an area with a population of less than 35,000. This includes many communities within a reasonable commute of larger cities -- about 97 percent of the geographic United States is eligible.

You can search [eligible areas](https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp&NavKey=property@11) on the USDA website.

### What properties are eligible?

You can purchase any property of your choosing within eligible areas subject to [certain requirements](https://www.rd.usda.gov/programs-services/single-family-housing-direct-home-loans):

- You must use the property as your primary residence.
- The size of the home can't exceed 2,000 square feet.
- Homes with in-ground swimming pools are not eligible.
- Market value based limitations may also apply.

### Who exactly is eligible for this type of loan?

To qualify for a USDA home loan, you need to have an income that is [below the limit](https://www.rd.usda.gov/files/RD-DirectLimitMap.pdf) for your metropolitan area and family size.

Additional financial requirements include the following:

- The monthly mortgage payment cannot exceed 29 percent of your income.
- Your total debt payments cannot exceed 41 percent of your income.
- You should have two years of steady income history.
- You should have no negative credit history within the past 12 months.

### So, how do USDA loans work?

USDA home loans have relaxed underwriting requirements to allow borrowers who wouldn't qualify for other mortgages to purchase a home. Generally, a down payment isn't required, but not making a down payment could increase your total loan costs.

If you're approved for an USDA home loan, it works [similarly to](https://www.rd.usda.gov/programs-services/single-family-housing-direct-home-loans) other mortgages.

- Your interest rate is determined by your credit score.
- You must pay mortgage insurance at the rate of 1 percent of the mortgage amount at closing plus 0.35 percent of the remaining balance per year.
- The repayment term can be as long as 38 years depending on your income.

### How do you apply for a USDA home loan?

USDA loans are backed by the federal government, but you must apply through a participating mortgage lender.

**Want to learn more? See if you **[**meet the requirements to qualify for a USDA home loan**](https://www.contourmortgage.com/news/usda-loan-requirements-to-keep-in-mind)**.**

[View full post](https://www.contourmortgage.com/news/what-are-usda-home-loans)

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