United States
Hong KongUSDA loans explained
USDA loans require the property to be in an eligible rural area and the household income to fall under a limit. They allow no down payment, which makes the two eligibility tests the whole question.
The program with two gates, and candidates who remember only one of them lose the question.
Gate one: the property
It must sit in an area designated eligible under the program. "Rural" is a designation rather than a description, and areas on the fringe of substantial towns often qualify while others do not.
Eligibility is checked against the designation, not by looking out of the window.
Gate two: the household
Household income must fall under a limit that varies by area and household size.
Note the word household. This is income-limited lending, and the calculation counts more than the applicants on the note.
A question describing an eligible property and an over-limit household has an ineligible borrower, and vice versa. Distractors are built by satisfying one test and failing the other.
What it offers
No down payment. That is the attraction, and it puts USDA alongside VA as the two zero-down programs on the syllabus.
Unlike VA it is not tied to military service, so the eligible population is quite different.
How to hold the three government programs apart
| Program | Down payment | Gate |
|---|---|---|
| FHA | 3.5 percent at 580 or above | Credit score |
| VA | None within entitlement | Qualifying service |
| USDA | None | Rural area and income limit |
Three rows. Learn them side by side rather than one at a time, because that is how the exam presents them.
Common questions
What are the USDA loan requirements?
The property must be in an eligible rural area and household income must fall under a limit that varies by area and household size.
Do USDA loans require a down payment?
No. USDA and VA are the two zero-down programs on the syllabus.
Does rural mean remote?
No. It is a program designation, and some areas near substantial towns qualify.
Is USDA income limit based on the borrower only?
No, on household income, which can include people not on the note.
How does USDA differ from VA?
Both allow no down payment, but VA depends on qualifying service and USDA on the property location and household income.