Date of Last Revision: August 8, 2026

A USDA loan is a zero-down-payment mortgage backed by the U.S. Department of Agriculture. It helps low- to moderate-income buyers purchase homes in designated rural and suburban areas.

How USDA Loans Work

• Government Backup: The USDA guarantees the loan, meaning private lenders can offer low interest rates without requiring a down payment.

• Location Rules: The home must be in a qualified rural or suburban area as defined by the USDA Property Eligibility Map.

• Income Caps: Household income cannot exceed 115% of the median income for that area.

• Fees: Instead of traditional monthly mortgage insurance, borrowers pay an upfront guarantee fee (around 1%) and a small annual fee (0.35%).

Types of USDA Mortgages

• Guaranteed Loans: Issued by approved local lenders for moderate-income buyers.

• Direct Loans: Issued directly by the government for very low-income buyers with deep payment assistance.

• Repair Loans/Grants: Help current rural owners fix or update their properties.

The USDA loan refinance seasoning requirement is 180 days. Your existing USDA loan must have closed at least 180 days prior to the new loan's request for Conditional Commitment, and you must have no payment delinquencies exceeding 30 days during that 180-day period.

Key Seasoning Rules

• Time Requirement: At least 180 days must pass from the note date of your current USDA mortgage to the agency submission date for the new Conditional Commitment.

• Payment History: You cannot have any mortgage payment 30 days or more late within the 180-day period prior to submitting your application.

• Restarting the Clock: If a delinquency greater than 30 days occurs during the window, the 180-day seasoning period may restart from the date of the delinquency.

• Payment Count: Lenders generally require at least 6 consecutive on-time monthly payments corresponding with the 180-day timeframe.

Available USDA Refinance Options

• Streamlined Refinance: Lowers rates or adjusts terms with simplified credit and income documentation, but no appraisal is typically required (unless it is a Direct loan with a subsidy).

• Streamlined-Assist: Requires no credit documentation or debt-to-income calculation, but requires a net tangible benefit (such as a $50+ monthly payment reduction).

• Non-Streamlined Refinance: Standard underwriting requiring full income, asset, credit documentation, and a new property appraisal.

A USDA Streamline Refinance lets eligible rural homeowners with an existing USDA loan lower their monthly mortgage payments with reduced paperwork, no home appraisal, and bypassed credit or income checks (under the Streamline-Assist option).

Key Program Requirements

• Payment History: Must have made at least 12 consecutive, on-time mortgage payments (or paid as agreed for the past 180 days with no late payment over 30 days).

• Tangible Benefit: The new monthly payment (principal, interest, and annual fees) must drop by at least $50.

• Loan Status: Your current USDA loan must be at least 180 days old.

• Occupancy: The property must be your primary residence.

Key Benefits

• No Appraisal: Bypasses the cost and time of a new home appraisal or inspection in most standard cases.

• No DTI or Credit Hurdles (Assist Option): Streamline-Assist does not require debt-to-income ratio calculations or new credit scores.

• Roll-in Costs: Closing costs and upfront guarantee fees can be rolled directly into the new 30-year fixed loan balance.

• Ineligible Areas Allowed: Homes located in areas that transitioned to "ineligible" status since the original purchase remain qualified for the refinance

What does this program do? The Section 502 Guaranteed Loan Program assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers – so no money down for those who qualify! Who may apply for this program?
Applicants must: Meet income-eligibility (cannot exceed 115% of median household income)Agree to personally occupy the dwelling as their primary residence Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien. What is an eligible rural area?
Utilizing this USDA's Eligibility Site you can enter a specific address for determination or just search the map to review general eligible areas. Why does Rural Development do this? This program helps lenders work with low- and moderate-income households living in rural areas to make homeownership a reality. Providing affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas. 

What does this program do?

Also known as the Section 502 Direct Loan Program, this program assists low- and very-low-income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income.

Who may apply for this program

A number of factors are considered when determining an applicant’s eligibility for Single Family Direct Home Loans. At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt.

Applicants must:

• Be without decent, safe and sanitary housing

• Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet

• Agree to occupy the property as your primary residence

• Have the legal capacity to incur a loan obligation

• Meet citizenship or eligible noncitizen requirements

• Not be suspended or debarred from participation in federal programs

Properties financed with direct loan funds must:

• Not have market value in excess of the applicable area loan limit

• Not be designed for income producing activities

Borrowers are required to repay all or a portion of the payment subsidy received over the life of the loan when the title to the property transfers or the borrower is no longer living in the dwelling.

Applicants must meet income eligibility for a direct loan.  Please select your state from the dropdown menu above.

What is an eligible rural area?

Utilizing the USDA Eligibility Site you can enter a specific address for determination or just search the map to review general eligible areas.

How may funds be used?
Loan funds may be used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

How much may I borrow?

Using the Single Family Housing Direct Self- Assessment tool, potential applicants may enter information online to determine if the Section 502 Direct Loan Program is a good fit for them prior to applying.  The tool will provide a preliminary review after a potential applicant enters information on their general household composition, monthly income, monthly debts, property location, estimated property taxes, and estimated hazard insurance.  Potential applicants are welcome to submit a complete application for an official determination by USDA Rural Development (RD) regardless of the self-assessment results.  Upon receipt of a complete application, RD will determine the applicant’s eligibility using verified information and the applicant’s maximum loan amount based on their repayment ability and the area loan limit for the county in which the property is located. 

What is the interest rate and payback period?

• Effective August 1, 2026, the current interest rate for Single Family Housing Direct home loans is 5.250% for low-income and very low-income borrowers.

• Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower

• Interest rate when modified by payment assistance, can be as low as 1%

• Up to 33 year payback period - 38 year payback period for very low income applicants who can’t afford the 33 year loan term

How much down payment is required?

No down payment is typically required. Applicants with assets higher than the asset limits may be required to use a portion of those assets.

Is there a deadline to apply?

Applications for this program are accepted through your local RD office year round.

How long does an application take?

Processing times vary depending on funding availability and program demand in the area in which an applicant is interested in buying and completeness of the application package.

What governs this program?

• The Housing Act of 1949 as amended, 7 CFR, Part 3550,

• HB-1-3550 - Direct Single Family Housing Loans Field Office Handbook

Why does USDA Rural Development do this?

USDA Rural Development’s Section 502 Direct Loan Program provides a path to homeownership for low- and very-low-income families living in rural areas, and families who truly have no other way to make affordable homeownership a reality. Providing these affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas.

NOTE: Because citations and other information may be subject to change please always consult the program instructions listed in the section above titled "What Law Governs this Program?" You may also contact your local office for assistance.

A USDA mortgage loan offers 0% down payment (100% financing) for qualified homebuyers purchasing primary residences in designated rural and small suburban areas. You can verify eligible property zones directly using the official USDA Property Eligibility Map.

Key Requirements

• Location: The home must be located in a USDA-approved rural or suburban area.

• Income Limits: Your household income cannot exceed 115% of the median income for the local area.

• Credit Score: Most lenders look for a minimum credit score of 620 to 640.

• Occupancy: The property must be your primary, owner-occupied residence.

Program Fees

• Upfront Guarantee Fee: Typically 1% of the loan amount, which can be rolled into your total mortgage.

• Annual Fee: An ongoing fee of about 0.35% of the remaining loan balance split into your monthly payments.

• No PMI: You do not have to pay traditional private mortgage insurance.