Advertiser Disclosure

Advertiser Disclosure: We may have financial relationships with companies listed on our site. We may receive compensation for placement of sponsored products or services and this may affect our decision about who to promote and where to promote them. We make every effort to be authentic and accurate with every article we write.

Cash loan


USDA Loans – How Do They Work and Do You Qualify?

Generally speaking, USDA loans are intended for people who do not have a safe place to live, cannot get help with lending elsewhere and have income that is a below a low-income limit for the area where they live. If you are in this sort of situation, applying for a USDA loan could be a good way of getting a roof over your head, without taking on debt that is a big struggle for you.

You will not normally be expected to put any money down, if you qualify for a USDA loan. This is a huge weight off your shoulders. You can take a look at a USDA Rural Housing Loan breakdown. We are going to examine some of the main points that you should know.

How do USDA loans work?

USDA loans are guaranteed, or provided, by the US Department of Agriculture, hence the name. They are intended to help with the purchase, or improvement, of property in rural, and occasionally suburban, areas. The government provides advice about applying for these loans, to people who are on low incomes. There are three different types of USDA loan that can be applied for:

  • Loans for property purchases that are provided by lenders but guaranteed by the USDA.
  • Loans that are provided by the USDA to people who have a very low income.
  • Loans and grants for home improvements.

There are certain eligibility requirements which have to be met, in order for you to receive help in the form of a USDA loan.

Eligibility requirements for a USDA loan

There are several requirements that need to be met, in order to qualify to be considered for a USDA loan.

  • Income must be below required limit for the state in which you live.
  • The loan must be for the purchase or improvement of a primary home, in a rural location (sometimes suburban locations are included, but urban properties do not qualify).
  • Applicant must be a US citizen or permanent resident. 
  • Debt to income ratios must be satisfied.
  • Regular and reliable income for at least the last two years must be proven.
  • An acceptable credit history must be in place. You can check your credit history before you apply, to identify and resolve and issues.

All of these factors are taken into account when deciding if you qualify for a USDA loan. It’s worth pointing out that if you have a credit score of 640 or higher, the application process is made a lot easier. You may still qualify for a USDA loan is your credit score is lower than this, but the application process is more stringent and you may be asked to provide proof of positive financial behavior, such as the payment of utility bills and rent. This means that it takes longer for your application to be accepted or rejected. It’s worth trying to make sure that you have a good credit rating before you make your application.

Photo of author

Erin Thompson

Erin Thompson spent years managing her own blog about budgeting and debt. Because of that, she has great insights not only about managing spending and borrowing but also about running websites profitably. When she's not writing articles for us, she's traveling and looking for new types of wines to try.
Want to Say in the Loop?

Get the latest updates we offer about all things "Money" by signing up for the CashBlog newsletter.

As Seen on

The content on is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.