What Is a USDA Loan?


Quick Answer

USDA loans are home loans for relatively low-income borrowers who wish to purchase a home in a rural area. Unlike most mortgages, no down payment is required.

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Full Answer

USDA loans are tailored for lower-income borrowers either with no credit history or a mediocre score. Though exceptions are possible, borrowers usually need a FICO score of at least 640. The home purchased must be a primary residence, and it typically must be in an area with a population of 20,000 or less. The borrower's income must be such that his combined mortgage principle, taxes, insurance and interest constitute no more than 29 percent of his monthly income. There are also maximum income requirements that vary by region.

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