A USDA loan is a type of mortgage that is backed by the US Department of Agriculture (USDA) and is designed to help people in rural and suburban areas become homeowners. USDA loans offer 100% financing, meaning borrowers can finance the entire purchase price of the home without a down payment.

To be eligible for a USDA loan, the property must be located in an eligible rural or suburban area. The USDA has specific guidelines for what qualifies as an eligible area, which can be checked on its website. Additionally, there are income limits for borrowers, which vary by location and family size. In general, borrowers must have a stable and dependable source of income, as well as a credit score of at least 640.

USDA loans typically have lower interest rates compared to other types of loans, and they also offer flexible credit requirements. However, USDA loans may have higher upfront fees, such as an upfront guarantee fee and an annual fee, which are designed to offset the cost of the loan program.

USDA loans are available for a variety of property types, including single-family homes, townhomes, and condominiums. They may also be used for new construction, renovations, and repairs. The loan limits for USDA loans vary by location and are based on median home values in the area.