USDA guaranteed loans
USDA Single Family Housing Guaranteed Loans help buyers in eligible rural and suburban areas, within income limits, buy with no down payment. The loan comes from a private lender, and USDA Rural Development guarantees it. Instead of mortgage insurance, it carries two guarantee fees:
- Upfront guarantee fee: 1% of the loan. It's usually financed, and because it's 1% of the total loan, the loan becomes the base amount divided by 0.99.
- Annual fee: 0.35% a year, paid monthly, figured on the average balance scheduled for each year, for the life of the loan.
These are USDA's rates for its fiscal year 2026, which runs to 30 September 2026. USDA can change them each fiscal year, within the maximums in the regulation (7 CFR 3555.107): 3.5% upfront and 0.5% a year. The rates for fiscal year 2027 hadn't been announced when this page was checked, so ask your lender which rates apply to your loan.
Who can use one
The main rules, from USDA's regulations:
- Income: your household's adjusted income can't exceed the moderate income limit for the area, which varies by location and household size.
- Location: the home must be in an eligible rural area.
- Occupancy: it must be your principal residence.
- Other credit: you must be unable to get a traditional conventional mortgage for the loan (7 CFR 3555.151).
USDA's eligibility site lets you check a property address and your household's income against the current limits. Your lender and USDA make the final decision.
How the calculator works it out
With “Add the upfront fee to the loan” ticked, the calculator finds the loan whose 1% fee, added to the base amount, makes up the total:
loan = base loan ÷ (1 − 0.01)
Unticked, the fee is 1% of the base loan, paid at closing. For the annual fee, it averages the balance scheduled for each year of the loan, takes 0.35% of that, and splits it into 12 monthly amounts. The fee falls a little each year as the balance does, and follows the original schedule, so extra payments don't reduce it, though paying the loan off early ends it.
Worked examples
All use 6.5% over 30 years, with nothing down, before taxes and homeowners insurance.
A $400,000 home
The upfront fee of $4,040.40 brings the loan to $404,040.40. Principal and interest is $2,553.81, and the first year's annual fee adds $117.25 a month, for $2,671.06. The annual fee is $115.89 a month in year 2 and $96.17 in year 12, and comes to about $27,750 over the loan.
Paying the fee at closing instead costs $4,000 (1% of $400,000). The loan stays at $400,000, principal and interest drops to $2,528.27, the annual fee to $116.08, and the total to $2,644.35. That saves about $5,150 of interest over 30 years, in exchange for more cash up front.
A $250,000 home, and FHA for comparison
The upfront fee is $2,525.25, the loan $252,525.25, and the payment $1,669.41: $1,596.13 of principal and interest plus $73.28 of annual fee. For comparison, an FHA loan on the same home at the same rate, with the minimum 3.5% down ($8,750), comes to $1,661.56 a month, including $110.01 of FHA mortgage insurance. The payments are close, but USDA needs no down payment. Real rates differ by program, so compare with rates you've been quoted.
Pitfalls and things to check
- USDA guaranteed loans must have a fixed rate and a term of no more than 30 years, and balloon and adjustable loans aren't allowed (7 CFR 3555.104). The calculator will let you combine USDA with other loan types; for a realistic figure, keep it fixed.
- Add property tax and homeowners insurance in the “Taxes, insurance” section. They can be a large share of the payment.
- The fee rates are as of the date shown. Loans in a new fiscal year may have different rates.
- The results don't check income or property eligibility, and leave out lender fees and other closing costs.
Common questions
Does a USDA loan have PMI?
No, but the annual guarantee fee works in a similar way: a monthly charge added to your payment. Unlike PMI, it lasts for the life of the loan.
Can I remove the USDA annual fee?
Not while you keep the loan; it runs for the life of the loan. Refinancing into a different loan ends it. The refinance calculator compares the principal and interest of the two.
Is there a down payment?
No down payment is required, though you can make one. Enter it to see a smaller loan and lower fees.
How do I know if a home is eligible?
Check the address on USDA's eligibility site, which also has the income limits for the area.
How much house can I afford with a USDA loan?
Choose USDA in the affordability calculator. To set a USDA loan next to an FHA or conventional one, use compare mortgages.
Fees for USDA's fiscal year 2026 (to 30 September 2026), as of 21 September 2026. USDA sets new fees each fiscal year; check the current figures with your lender.