USDA Loan Eligibility Requirements

USDA home loans are government-backed mortgages designed to help low—to moderate-income buyers purchase homes in eligible rural or suburban areas. They offer many benefits, including low interest rates, reduced mortgage insurance, and a zero down payment requirement.

However, unlike conventional loans, USDA loans have additional requirements beyond just being financially qualified. If you're considering a USDA loan for your home purchase, this guide can help you determine if you're eligible.

Who is eligible for a USDA loan?

How to Qualify for a USDA Loan in 2025

To qualify for a USDA loan, you need to meet a USDA lender's financial qualifications, ensure you make less than the USDA income limits set by HUD, and find a property within the USDA's eligible area.

1. Meet a USDA Lender's Requirements

   There are two types of USDA loans: USDA Guaranteed Loan and USDA Direct. Most USDA borrowers have USDA Guaranteed Loans since they are much easier to qualify for than USDA Direct Loans.

   The USDA still sets minimum requirements for USDA Guaranteed Loans, but some lenders set higher benchmarks than what the USDA requires.

   The USDA does not have an established minimum credit score, so USDA credit requirements are determined individually by lenders. The typical cutoff for most USDA lenders is 620, however, many lenders can and will work with you to establish your creditworthiness differently using compensating factors.

   Neighbors Bank's current minimum credit score is 620.

   Neighborly Advice

   If your credit score is below 620 or you don't have a credit history, you might still qualify for a USDA loan with the help of an experienced lender. Some lenders consider other financial strengths, like having a solid savings account, low debt, or a new mortgage payment that's lower than what you currently pay for housing. They may also ask you to show a history of on-time payments for things like rent, utilities, or health insurance over the past 12 months to help build your credit profile and improve your chances of approval.

   In addition to meeting USDA credit score minimums, you also typically need a maximum debt-to-income ratio of 41% and a stable source of income. Stable income is generally defined as holding the same job for the past two years. Certain employment scenarios are exempt from this requirement. You can check with a Neighbors Bank specialist to see if you qualify.

   You will need to provide a lender with documents like paystubs, W-2s, and bank statements along with verification from your employer so they can verify your financial situation.

2. Make Sure You're Within USDA Income Limits

   USDA loans are designed to provide an affordable financing option for low-to-moderate-income homebuyers. Because of this, your household's total income can't exceed local USDA income limits.

   Income limits are calculated using 115% of the area's median household income — so your income can't be any more than 15% higher than the surrounding area's median income.

   The current average USDA income limit for 1-4 member households is $112,450. For 5-8 member households, the average limit is $148,450. USDA loan limits may be higher to account for areas where the average cost of living is a bit pricier.

   Neighborly Advice

   The USDA loan income limit is based on the annual income of all adult household members (18 or older). This means that USDA lenders must count the income of all adults who will occupy the new property, whether they are listed as co-borrowers or not. There are a few exceptions, for example, full-time students.

   Use our free USDA Loan Income Limit Tool to see if you qualify!

3. Find a USDA Eligible Property

   Only properties within USDA-designated rural areas can be purchased with a USDA home loan.

   The definition of "rural" doesn't just mean farmland and homes in very remote areas. Many suburban properties are eligible for USDA loans as well.

   The condition of the home you're buying matters, too. The USDA outlines specific minimum property requirements (MPRs) to ensure the house you buy is a safe and sound investment.

   The home must have:

   • Direct access to a road, street, or driveway
   • Proper utilities, water, and sewage disposal
   • A structurally sound foundation
   • Adequate roofing
   • Functional heating, cooling, and electrical systems

   Additionally, USDA loans can only be used to purchase single-family homes that will serve as your primary residence. Investment properties and second homes are ineligible.

   Use our free USDA Property Eligibility Map to see if a home you're considering is eligible!

4. Get Pre-Approved

   To apply for a USDA home loan, you'll need to work with a lender approved by the U.S. Department of Agriculture. Not all lenders offer USDA loans, so it's important to find one with experience with the program.

   Neighbors Bank is one of the Top Five USDA Lenders in the United States. We can help you determine whether you meet the qualifications and ensure that all necessary paperwork is completed correctly.

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Sources:
https://www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-guaranteed-loan-program
https://www.rd.usda.gov/media/file/download/sfh-lenderrankings.pdf