Short answer: the USDA Single Family Housing Guaranteed Loan Program backs fixed-rate home loans of up to 30 years, made by participating lenders, for households with incomes up to 115 percent of the area median who buy a home in an eligible rural area. The loan can cover up to the appraised value plus the upfront guarantee fee, so no down payment is required. There is an upfront fee and an annual fee, both capped by law. For households with lower incomes, USDA also makes direct loans. This page covers federal law only. It is general information, not legal or financial advice.
Who it serves
The law says guaranteed loans may be made only to low or moderate income families or persons whose incomes do not exceed 115 percent of the median income of the area, as determined by the Secretary of Agriculture, and that USDA guarantees 90 percent of the loan (42 U.S.C. 1472(h)(2)-(3), LII, read October 30, 2026). The regulation says the household’s adjusted income must not exceed the moderate income limit at the time the loan decision is made, the home must be your principal residence, and USDA will not guarantee loans for investment property (7 CFR 3555.151(a) and (c), eCFR, text up to date as of October 28, 2026). A current homeowner may qualify only if conditions are met, such as the current home no longer meeting the household’s needs (3555.151(e)).
The home must be in an eligible rural area. USDA’s income and property eligibility site lets you check an address and estimate household income against the limit for the area; it is a USDA tool, and only the lender and USDA decide your case. Loan funds must be used to buy, build or buy and repair a home you will live in (7 CFR 3555.101(a), eCFR).
Loan terms
| Item | Rule | Source |
|---|---|---|
| Rate | Fixed for the life of the loan, negotiated with the lender | 7 CFR 3555.104(a) |
| Term | Not more than 30 years; adjustable rates, balloon terms and prepayment penalties are not allowed | 3555.104(b) |
| Maximum loan | The lesser of the appraised market value plus the upfront fee, or the price plus eligible acquisition costs | 3555.103(a)-(b) |
| Costs that can be financed | Listed closing costs, the upfront fee, and an escrow cushion for the annual fee of up to 2 months | 3555.101(b)(6) |
| Seller help | No guarantee if the seller or another interested party pays more than 6 percent of the price toward your costs, unless USDA allows it | 3555.102(h) |
| Qualified mortgage | A guaranteed loan that meets USDA rules and the points and fees and term limits in Regulation Z is a qualified mortgage | 3555.109 |
Sources: 7 CFR 3555.103 (eCFR) and 3555.104 (eCFR), with 3555.101, 3555.102 and 3555.109 in the same part. For what a qualified mortgage means, see the mortgage ability-to-repay rule.
The fees
The law lets USDA collect from the lender a fee of not more than 3.5 percent of the principal when the guarantee is issued, and an annual fee of not more than 0.5 percent of the outstanding balance for the life of the loan (42 U.S.C. 1472(h)(8)). The regulation says the upfront fee is nonrefundable once the guarantee is issued and may be passed on to you, that the annual fee is figured on the average annual scheduled unpaid balance and may also be passed on to you, and that the current fee is set by USDA and may change (7 CFR 3555.107(g)-(h), eCFR). The budget assumptions OMB published in April 2026 list an upfront fee of 1.00 percent and an annual fee of 0.35 percent for this program for 2026 and 2027 (OMB Federal Credit Supplement, Tables 4 and 6, read October 30, 2026). We could not open USDA’s own fee notice from our server, so ask the lender which rates apply on your closing date.
Example
This example is only for the math, with an example $250,000 price equal to the appraised value, and the 1.00 and 0.35 percent rates above, not terms from any lender. The annual fee shown is a rough first-year figure on the starting balance; because it is figured on the average scheduled balance, the actual amount is a little lower.
| Item | Example |
|---|---|
| Price and appraised value | $250,000 |
| Down payment | $0 |
| Upfront fee at 1.00% of $250,000 | $2,500 |
| Loan amount if the fee is added | $250,000 + $2,500 = $252,500 |
| Rough first-year annual fee at 0.35% | $252,500 × 0.35% = $883.75 |
| Rough monthly amount | $883.75 ÷ 12 = $73.65 |
The regulation uses two ratios to check repayment: the housing payment, including taxes, insurance, association dues and the monthly annual fee, should not exceed 29 percent of repayment income, and that payment plus other recurring debts should not exceed 41 percent; a lender may go above them with compensating factors (7 CFR 3555.151(h)(1)-(2)). Only for the math, with an example monthly repayment income of $5,000, those limits are $1,450 and $2,050 a month.
The direct loan program
USDA also makes home loans itself, under 7 CFR part 3550 (eCFR). For a direct loan, the household’s adjusted income must not exceed the low-income limit for the area when the loan decision is made, and the moderate-income limit at closing (3550.53(a)). The term is up to 33 years, or 38 years for some applicants at or below 60 percent of the area median income who need it to show repayment ability (3550.67). Eligible borrowers may receive a payment subsidy, which can lower the payment to as little as what it would be at a 1 percent rate, and which may have to be repaid when you sell the home or stop living in it (3550.68). Ask USDA which program fits your income.
How it compares
FHA loans charge an upfront and annual mortgage insurance premium; see FHA mortgage insurance premiums. VA loans charge a one-time funding fee with no annual fee; see the VA home loan funding fee. Compare the total cost of each over the time you expect to keep the loan.
Questions to ask the lender
- Is the address in an eligible area, and does my household income fit the limit for the area?
- Which upfront and annual fee rates apply on my closing date?
- What is my loan amount if I add the upfront fee, and what is my monthly payment with the annual fee?
- How do my ratios compare with 29 and 41 percent?
- Would I qualify for a USDA direct loan instead?
Checklist
- Check the address and your income on the USDA eligibility site.
- Find the upfront and annual fees on your Loan Estimate and Closing Disclosure.
- Confirm the rate is fixed and the term is 30 years or less.
- Keep your conditional commitment and closing papers.
- Compare the cost with FHA and VA options if you qualify for them.
You can submit a complaint about a lender at consumerfinance.gov/complaint.
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Sources
- LII: 42 U.S.C. 1472, Financial assistance by Secretary of Agriculture (section 502 of the Housing Act of 1949)
- eCFR: 7 CFR 3555.151, Eligibility requirements, current text up to date as of October 28, 2026
- USDA: Income and property eligibility site for single family housing programs
- eCFR: 7 CFR 3555.101, Loan purposes, current text up to date as of October 28, 2026
- eCFR: 7 CFR 3555.103, Maximum loan amount, current text up to date as of October 28, 2026
- eCFR: 7 CFR 3555.104, Loan terms, current text up to date as of October 28, 2026
- eCFR: 7 CFR 3555.107, Application for and issuance of the loan guarantee, current text up to date as of October 28, 2026
- OMB: Budget of the U.S. Government, Fiscal Year 2027, Federal Credit Supplement (April 2026), Tables 4 and 6
- eCFR: 7 CFR part 3550, Direct single family housing loans and grants, current text up to date as of October 28, 2026
- CFPB: Submit a complaint
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.