Requirements To Qualify for a USDA Home Loan

Loans from the U.S Department of Agriculture can be a sweet deal, offering 0% down payment, low-interest-rate mortgages in rural and suburban areas. 

Because the purpose of these USDA government programs and loans is to help low-and moderate-income buyers afford a home, not everyone is eligible. To take advantage of this specialized loan type, applicants must meet the USDA's qualifications.

The main criteria boils down to income, although the income restrictions are more lenient than many homebuyers realize. As a result, far more people qualify for USDA loans than ever take advantage of them.

USDA loan eligibility requirements

First and foremost, any property being considered for purchase must be within the boundaries of what the USDA deems an eligible rural or suburban area.

“There's actually a lot of areas out there that qualify for USDA that I think people that live in them would be surprised to know themselves,” Jake Vehige, president of mortgage lending at Neighbors Bank explains. “What’s limited are the types of properties you can finance due to the income caps of the borrowers.”

The USDA will check an applicant's personal qualifications.

At the most basic level, everyone applying for a USDA loan must meet the following criteria:

• Income eligibility limits and can prove stable income over time.
• Credit worthiness (though there is technically no minimum credit score requirement, 640 is generally considered the bottom threshold).
• A U.S. citizen or a qualifying noncitizen, such as a permanent legal resident or qualified alien.
• Agrees to personally occupy the home as a primary residence.

The USDA and USDA-approved lenders also typically will look at an applicant's debt-to-income ratio, which compares an applicant's monthly income with monthly debts. This should ideally be lower than 43%.

In 2025, a household of 1 to 4 must make less than $119,850, and a household of 5 to 8 must make $158,250 or less to qualify for USDA.

USDA direct loan applicants who meet all of the above guidelines must also satisfy an additional layer of qualification: They must prove they are currently without decent, safe, and sanitary housing and that they are unable to obtain a loan elsewhere, with terms and conditions that they would reasonably be expected to meet. This issue could commonly crop up in extremely remote areas, where loans are hard to get and available lenders are limited.

Different types of USDA home loans 

There are two types of USDA loans used for buying a home:

• Direct loans are for very low-income applicants and are funded and administered by the USDA directly.
• Guaranteed loans are for homebuyers with more moderate incomes. In this case, borrowers are financed by lenders, but the loans are guaranteed by the USDA. This means the USDA is on the hook to pay the loan in case the borrower can't, which enables lenders to offer these loans without shouldering too much risk.

Additionally, there is a home improvement grant available through the USDA. These grants allow homeowners to repair or improve their home. They may also be available to low-income senior citizens who need to upgrade for health or safety reasons.

How the USDA calculates eligibility

The USDA tallies household income in ways that are subtly different from other agencies' calculations. For one, the USDA counts income from all household adults, who are 18 or older—not just the individual or people who are hoping to buy the house. This applies to children still living at home of working age.

In addition to income from jobs, the USDA also will count the following toward your eligible income total:

• Disability/Social Security payments
• Pension/retirement income
• Unemployment compensation
• Military and self-employment income
• Alimony/child support
• Rental income

And while it might not seem fair, it is also important to note that your total household income for USDA eligibility purposes could be different from the income amount a lender might use to qualify you for the loan.

For instance, the Social Security benefits of an elderly parent who lives with you might be recorded on your USDA loan application but not counted on your lender application—even if you're applying through that lender for a USDA-guaranteed loan.

There are also different eligibility requirements depending on where you live. Different states carry different USDA requirements, so it’s best to check the official USDA website for requirements. 

How to apply for a USDA home loan

Only the USDA offers USDA direct loans. Therefore, you’ll need to apply at your local branch office, which you can find through the USDA website. 

Private lenders, like Neighbors Bank, will note if they offer USDA guaranteed loans on their website. 

Vehige explains that if you’re working with a private lender, strive to come prepared. 

“We want to know your timeline and where you’re looking to purchase to start,” he says. “And then we're going to get into things like your income, because that's obviously very crucial for USDA. We need to make sure that your income doesn't put you above that cap. Come prepared with pay stubs and W-2s,if you have those handy. Your loan office can talk you through the rest.”

Once you prequalify with the USDA-approved lender, the process will look generally the same as any other home loan process. You’ll first need to get pre-approved, before finding a USDA-eligible home. You’ll then sign the purchase agreement to get underwriting approval. 

Once the final USDA loan approval is in hand, you’ll sign and close on your new home.

Additional edits and information provided by Dina Sartore-Bodo.