Because they're guaranteed by the U.S. Department of Agriculture, USDA loans don't require a down payment or private mortgage insurance. That makes them a great option for first-time homebuyers looking in rural or suburban areas.
Interest rates on USDA loans are also usually lower than for conventional loans, and lenders are typically more flexible with credit score requirements.
CNBC Select reviewed lenders offering USDA mortgages and selected the top ones based on rates, customer service and more. (See our methodology for more on how we make our selections.)
What is a USDA loan?
A USDA loan is a mortgage backed by the U.S. Department of Agriculture. As a result, USDA loans don't require a down payment and have lower rates than conventional loans and more flexible credit requirements.
Instead of mortgage insurance, borrowers pay a 1% upfront guarantee fee and an annual fee equal to 0.35% of the loan amount.
There are two kinds of USDA loans: USDA guaranteed loans, which are funded by approved private lenders and guaranteed by the Department of Agriculture, and USDA direct loans, which are funded by the department directly.
USDA loans are intended to help lower- and middle-income Americans afford homes in rural areas, so applicants must meet income and geographical requirements.
Best for bad credit or no credit: Guild Mortgage
- Offers a wide range of uncommon loans, so you're more likely to find one that fits your needs than with other lenders.
- Boasts several down payment assistance programs, making it a great lender for first-time homebuyers who may not have much saved up for a down payment.
- Some loans closes can receive a 17 day closing guarantee, which can ensure you get the keys to your home in quicker than half the average timeline.
- E-closings available so you may be able to finalize your mortgage paperwork from your couch.
- Rates are not available online
- Does not issue mortgages in New York
Who's this for? Guild Mortgage accepts applicants with credit scores as low as 540, compared to 580 for most USDA loan providers. It also considers non-traditional credit sources, like on-time rent or utility payments.
Standout benefits: Guild offers hybrid e-closings, so borrowers can finish most closing paperwork online.
Best for first-time homebuyers: Flagstar Bank
- Provides grants of up to $15,000 for first-time homebuyers, making it a great option for those who may not have much saved up for a down payment or closing costs.
- Destination Home Mortgage allows qualified buyers to put 0% down, a rare no-down-payment loan option geared towards first-time homebuyers.
- Possible to close in as few as 15 days, meaning you'll get the keys to your new home in less than half the time it usually takes.
- Rates tend to be higher than industry average
- Home equity loans only available in nine states
Who's this for? Flagstar's Gift Program can give first-time homeowners a rebate of up to 3% of their total home price. With the Flagstar Power-Up program, first-timers in designated census tracts can receive up to $8,000 in grants and gift funds.
Standout benefits: In addition to USDA loans, Flagstar offers the Destination Home Mortgage, another zero-down loan with no private mortgage insurance (PMI). The MyLoan portal lets borrowers easily manage their mortgages online.
Best for in-person experience: PNC Bank
- With its lower-than-average mortgage rates, PNC is a great option for people prioritizing affordability
- Offers USDA loans (not all lenders do)
- PNC Community Loan requires only 3% down and no PMI, a great option for people that can't afford a large down payment but don't want to add the additional monthly cost of PMI
- $7,500 grant for down payment or closing cost, which can help those low on cash own a home.
- No home renovation or home equity loans
- High credit score requirement for FHA mortgage
- Ranked below average for customer satisfaction by J.D. Power
Who's this for? PNC Bank has over 2,000 branches in 28 states, making it a good option if you want to talk with a loan officer in person.
Standout benefits: The PNC Grant provides up to $7,000 to borrowers who buy a home in a low- or moderate-income census tract. PNC's Community Loan only requires 3% down and no PMI.
Best for borrowers in the Sun Belt: Movement Mortgage
- Nationwide availability
- Seven-day loan processing
- Movement Boost covers down payment for FHA mortgage
- Not transparent about interest rates online
- Movement Boost not available in New York
Who's this for? Based in Indian Land, South Carolina, Movement Mortgage is among the top USDA loan providers in that state by volume — as well as in Alabama, Florida and North Carolina. It's ranked sixth nationwide.
Standout benefits: Movement's average close timeline is 24 days, nearly half the industry average. The Movement Comunidad initiative aims to increase homeownership in the Latino community with bilingual agents and online applications in both English and Spanish.
Best for borrowers in the Midwest: Flat Branch Home Loans
Flat Branch Home Loans
Rates
Fixed-rate and adjustable-rate available, apply online for rates.
Types of loans
Conventional, USDA, VA, FHA, Indian Home Loan Guarantee, Community Champions loan, HomeReady, Home Possible, Bridge loan and renovation loan.
Term
15-years and 30-years
Credit needed
Does not disclose
Minimum down payment
0% if moving forward with a USDA loan; 3% if moving forward with HomeReady or HomePossible; 3.5% if moving forward with FHA loan.
Pros
- Wide range of loan options
- A- rating from the BBB
- Many locations throughout the Midwest
Cons
- Only available in certain states
- Little information on rates or credit score requirements on website
Who's this for? Flat Branch is the largest lender of USDA loans in Kansas, Illinois, Oklahoma and Missouri. Its loan officers are well-versed in state-specific programs that can help USDA mortgage recipients with closing costs, down payments and other fees.
Standout benefits: The Flex Funds program provides up to $4,000 toward closing costs or a down payment for borrowers who meet income requirements.
Best for a speedy closing: PrimeLending
PrimeLending
Rates
Fixed-rate and adjustable-rate available, apply online for rates.
Types of loans
Conventional, jumbo, FHA loan, VA loan, USDA loan, new construction loan, 3D-printed house loan, down payment assistance loans.
Term
15-years and 30-years
Credit needed
Does not disclose
Minimum down payment
0% if moving forward with a USDA loan; 3.5% if moving forward with FHA loan.
Pros
- Wide range of loan options
- A+ rating from the BBB
- Available in all 50 states
Cons
- Little information on rates or credit score requirements on website
- Fast closing time
Who's this for? PrimeLending promises a 21-day closing for many borrowers, backed by a $5,000 guarantee. It received a 2023 MortgageCX award for closing timeframe.
Standout benefits: PrimeLending's AdvantEDGE program allows borrowers to get approved within 24 hours and receive a $250 lender credit.
How to qualify for a USDA loan
There are several requirements to be eligible for a USDA loan.
- Borrower income: You should make no more than 115% of the area median income (AMI) where you are buying for a USDA guaranteed loan from a private lender. For a USDA direct loan, borrowers should make no more than 80% of the AMI.
- Property location: The loan must be for a primary residence in a USDA-approved rural area. You can check a location using the USDA eligibility map.
- Credit score: There is no set credit score requirement for USDA loans but, typically, lenders want to see a credit score of at least 640. Some lenders, like Guild Mortgage, will consider alternative forms of credit.
- Debt-to-income ratio: Your monthly housing costs shouldn't exceed 34% of your gross monthly income and your overall debt-to-income ratio shouldn't exceed 41%.
You'll also be subject to a USDA-specific appraisal and be ready to move into the home within 60 days of closing.
Pros and cons of USDA loans
While there's a lot to recommend about USDA loans, there are some drawbacks.
Pros
- No down payment required
- Rates are typically lower than conventional mortgages.
- Flexible credit and debt-to-income ratio requirements
- No private mortgage insurance
Cons
- Limited to borrowers with 115% of the average median income
- Property must be in a USDA-approved rural area
- Borrowers must pay an upfront guarantee fee and an annual fee
- The underwriting process usually takes longer
Different types of government-backed mortgages
USDA loans are just one kind of government-backed mortgage. These low- and no-down-payment loans help millions of Americans achieve homeownership but have different eligibility requirements.
| Minimum down payment | Eligibility | Minimum credit score | |
|---|---|---|---|
| VA loan | 0% | Active-duty U.S.service members veterans, Reserves National Guard and eligible surviving spouses | 620 |
| FHA loan | 3.5% | Debt-to-income ratio of 43% percent or less (up to 50 percent in some cases) | 580 with 3.5% down or 500 with 10% down |
| USDA loan | 0% | No more than 115% area median income, property in qualifying area | Typically 640 |
| HomeReady mortgage | 3% | No more than 80% of the area median income | 620 |
| Home Possible® mortgage | 3% | No more than 80% of the area median income | 660 |
| HomeOne® mortgage | 3% | First-time homebuyers (no income requirement) | 660 |
FAQs
What are the income limits for USDA loans?
To qualify for a USDA guaranteed loan, you should make no more than 115% of the area median income (AMI) in the county where you are buying a home. If you are taking out a USDA direct loan, funded by the Department of Agriculture, the AMI maximum is 80%.
Where can I buy a home with a USDA loan?
USDA loans are limited to homes in locations that meet the Rural Development Agency's requirements for a rural area. While many people think that only remote areas qualify, more than 95% of U.S. land is eligible. You can check if a specific address qualifies on the USDA Eligibility Site.
What's the difference between a USDA guaranteed loan and a USDA direct loan?
USDA guaranteed loans are backed by the Department of Agriculture but are funded by a bank, credit union or other private lender. USDA direct loans are issued directly by the Department of Agriculture and have set interest rates and more stringent income requirements.
Can I refinance a USDA mortgage?
Both USDA direct and guaranteed loan borrowers can apply for refinancing if they've made regular mortgage payments for the past 12 months.
Do USDA loans require private mortgage insurance?
USDA loans don't require private mortgage insurance, but borrowers do need to pay a guarantee fee, which is equal to 1% of the loan amount. There is also an annual fee equal to 0.35% of the loan amount.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage lender review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of home loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best small down payment mortgages.
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Our methodology
To determine which USDA mortgage lenders are the best, CNBC Select analyzed dozens of U.S. mortgage providers, including online lenders and brick-and-mortar banks and credit unions.
When ranking the best USDA loans, we focused on the following features:
- USDA lending history: Not every mortgage lender provides USDA loans. We considered each lender's USDA loan volume over recent years based on the Department's rankings by volume nationally and within rural states.
- Closing timeline: The lenders on our list offer closing timelines that vary from as promptly as two weeks after the home purchase agreement has been signed to as many as 45 days after the agreement has been signed. Specific closing timelines have been noted for each lender.
- Flexible minimum and maximum loan amounts/terms: Each mortgage lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
- Streamlined application process: We considered whether lenders offered a convenient, fast online application process and/or an in-person procedure at local branches.
- Customer support: Every mortgage lender on our list provides customer service via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
After reviewing the above features, we sorted our recommendations by best for bad or no credit, for first-time homebuyers, for in-person experience, for borrowers in the Sun Belt, for borrowers in the Midwest and for a speedy closing.
Rates and fee structures advertised for mortgages fluctuate in accordance with the Federal Reserve rate. However, once you accept your mortgage agreement, a fixed-rate APR will guarantee your interest rate and monthly payment will remain consistent throughout the entire term of the loan, unless you choose to refinance your mortgage at a later date for a potentially lower APR. Your APR, monthly payment and loan amount depend on your credit history, creditworthiness, debt-to-income ratio and the desired loan term. To take out a mortgage, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.
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