USDA loans are mortgages backed by the United States Department of Agriculture. They’re available to low-to-moderate income borrowers who live in eligible rural and suburban areas. You can use the USDA’s property search tool to see if a home you’re looking at is in an eligible area.
The main benefit of getting a USDA loan over a conforming mortgage — what most people think of as “normal mortgages” — is that USDA loans don’t require a down payment. They often have better interest rates, as well.
A USDA loan is a great option if you earn a low-to-moderate income and want to buy a house in a rural area. Here are our picks for the top USDA mortgage lenders.
CMG Financial
The bottom line: CMG Financial is a good USDA lender, but you must have a credit score to get a mortgage.
The pros of CMG Financial:
Available in all 50 US statesAlthough alternative credit data (such as proof of paying bills on time) cannot fully replace a credit score, it can be shown to prove you are actively improving your financesThe BBB gives it an A- rating
The cons of CMG Financial:
No way to see interest rates on its websiteAlternative credit alone cannot help you get a mortgage
Fairway Independent Mortgage Company
The bottom line: Fairway Independent Mortgage is an especially good option if you want to close online instead of in person.
The pros of Fairway Independent:
Available in all 50 US statesA+ rating from the BBBAccepts alternative forms of creditEasy-to-navigate websiteOption to close on your mortgage digitally instead of in person
The cons of Fairway Independent:
Rates aren’t posted onlineGet a USDA mortgage with a credit score as low as 620 if other parts of your financial profile are great; otherwise, you may need a score of 640 or 660
Flagstar Bank
The bottom line: Flagstar Bank is a good lender if your credit score is at least 620.
The pros of Flagstar Bank:
Available in all 50 US statesEnter personal information to see customized rates onlineA- rating from the BBB
The cons of Flagstar Bank:
Doesn’t accept alternative forms of creditRanks low on the J.D. Power 2021 Primary Mortgage Origination Satisfaction Survey
Freedom Mortgage
The bottom line: You may like Freedom Mortgage if your credit score is as low as 600, which is lower than what some of our other top picks require.
The pros of Freedom Mortgage:
Available in all 50 US statesQualify with a lower credit score than with many lendersA+ score from the BBB
The cons of Freedom Mortgage:
Ranks low on the J.D. Power 2021 Primary Mortgage Origination Satisfaction SurveyNo way to see mortgage rates onlineDoesn’t accept alternative forms of credit
Guild Mortgage
The bottom line: Guild Mortgage is good for people with low credit scores, especially if you want to close on your mortgage digitally.
The pros of Guild Mortgage:
Get a USDA mortgage with a credit score as low as 600Accepts alternative forms of creditOption to close online instead of in personA- score from the BBB
The cons of Guild Mortgage:
Unavailable to residents of New Jersey or New York
Movement Mortgage
The bottom line: Movement Mortgage is an especially good option if you have a credit score as low as 580 and don’t qualify for a USDA loan elsewhere.
The pros of Movement Mortgage:
Available in all 50 statesQualify for a USDA mortgage with a credit score as low as 580A+ rating from the BBB
The cons of Movement Mortgage:
No customized mortgage rates shown on the websiteDoesn’t accept alternative forms of credit for USDA loans (but it does for FHA loans)
Truist
The bottom line: Truist is a good option unless you live in Alaska, Arizona, or Hawaii, where it doesn’t process mortgages.
The pros of Truist:
Accepts alternative forms of credit if you do not have a credit score (you must show a credit score if you have one, though)A+ rating from the BBB
The cons of Truist:
There are sample interest rates on its website, but you can’t see customized rates onlineNot available to residents of Alaska, Arizona, or Hawaii
Other USDA loan lenders we considered
USDA loans aren’t as common as FHA or VA loans, and not as many lenders offer them. There are a few lenders that we considered but didn’t make the cut for our list of best USDA loan lenders:
Caliber Home Loans: To get in touch with someone at Caliber Home Loans (either through messaging or on the phone), you have to create an account with the lender first.Carrington Mortgage Services: You’ll need a credit score closer to 700 to get a USDA loan with Carrington.PNC Bank Mortgage: You must have at least 3% down for a USDA loan.Veterans United Mortgage: Veterans United does offer USDA loans, but the lender’s main focus and strength is VA loans.
Methodology: How we chose the best USDA lenders for 2022
To choose the top USDA loan lenders, we looked at three main factors:
Affordability/credit score. USDA loans are known for being an affordable option, with no down payment for qualifying borrowers. They also usually have more lenient credit score requirements than conventional mortgages. We chose lenders that accept low credit scores or are flexible about credit scores if other parts of your financial profile are strong. Some of the companies on our list also accept alternative forms of credit in place of a credit score.Customer satisfaction. If the lender appeared in the J.D. Power 2021 Primary Mortgage Origination Satisfaction Survey, we looked at its ranking. If it wasn’t in the survey, we read online customer reviews.Ethics. Almost all of our top picks received an A or A+ from the Better Business Bureau, which measures companies’ trustworthiness. The exception is Guild Mortgage, which has an B+ from the BBB.
Are these lenders trustworthy?
To compare each USDA lender’s trustworthiness, we’ve examined grades from the Better Business Bureau.
The BBB grades businesses based on responses to customer complaints, transparency about business practices, and honesty in advertising. Here are the scores for our top picks:
USDA lenderBBB gradeCMG FinancialA-Fairway Independent Mortgage Co.A+Flagstar BankA-Freedom MortgageA+Guild MortgageA-Movement MortgageA+TruistA+
With the exception of Guild Mortgage, all the lenders on our list have an A- or higher from the BBB.
Guild Mortgage has a B+ because the BBB is acknowledging a public controversy between the mortgage lender and the government. The BBB says CMG Financial has an A- rating because it hasn’t resolved 102 customer complaints.
A couple of these lenders do have recent public controversies.
The Consumer Financial Protection Bureau fined Freedom Mortgage $1.75 million in 2020, claiming that loan officers purposely entered incorrect sex, race, and ethnicity information on borrowers’ home loan applications. The order states that from 2014 to 2017, if a borrower didn’t fill in the race/ethnicity section of an application, officers marked it as non-Hispanic white.
In 2020, Guild Mortgage paid the United States $24.9 million when it was accused of approving FHA mortgages for people who didn’t qualify, resulting in loan defaults.
Frequently asked questions
What is a USDA loan?
A USDA loan is a mortgage backed by the United States Department of Agriculture. It’s for borrowers with low-to-moderate income levels who buy homes in rural or suburban areas.
There are two main types of USDA home loans:
Guaranteed: This type is backed by the USDA, and you apply through a participating lender.Direct: The USDA actually issues the loan, so you apply directly with the USDA.
When people refer to a USDA loan, most are referring to a guaranteed loan, aka the USDA Rural Development Guaranteed Housing Loan Program — and that’s the type of USDA loan you can get with the lenders on our list.
With a USDA loan, you can buy a home with no down payment. You must get a fixed-rate mortgage; adjustable rates aren’t an option.
If you’re interested in a USDA direct loan, you’ll need to go to the USDA’s site. These mortgages are only available to low- and very-low-income individuals who don’t currently have “decent, safe, and sanitary housing” and are unable to get a loan through other means.
Who qualifies for a USDA loan?
A lender looks at two factors to determine whether you qualify for a USDA loan: your property and your financial profile.
Property eligibility
You may qualify for a USDA loan if you’re buying a home in a rural or suburban area. The population restrictions are 20,000 for some counties and 35,000 for others.
If you already know the address of the home you want to buy, enter the information into the USDA Property Eligibility Site. You’ll need to select which type of USDA loan you’re interested in, so you’ll choose “Single Family Housing Guaranteed” if you want a guaranteed USDA loan.
Borrower eligibility
Here’s what you need to qualify for a USDA loan:
You must be a US citizen or permanent resident.Your household should be at a low-to-moderate income level. The maximum income requirement depends on where you live, and you can see your county’s income limit here.You’ll need to provide proof of stable income for at least the last two years.Many lenders require a good credit history, although some of the companies on our list accept lower credit scores and alternative forms of credit, such as proof of paying rent on time.Your monthly mortgage payments should not exceed 29% of your monthly income. This number includes your loan principal, interest, insurance, taxes, and homeowner’s association dues.Other debt payments should come to 41% or less of your monthly income. However, you could qualify with a higher debt-to-income ratio if your credit score is very good or excellent.
There is no maximum borrowing limit. A lender will approve you to borrow a certain amount based on your financial profile.
What is the best USDA loan lender?
All of the lenders on this list are strong USDA loan lenders. Your exact match will partly rely on your credit score. For example, if your credit score is under 620, you’ll want to go with Freedom Mortgage, Guild Mortgage, or Movement Mortgage.
Look for other factors that are important to you in a lender. For instance, to close on your USDA loan digitally instead of in person, you’ll like Fairway Independent Mortgage Co. or Guild Mortgage.
What is the minimum income for a USDA loan?
USDA loans are for people with low-to-moderate income levels, but your exact income limit depends on your state and county. See the USDA’s guide to income limits by county.
Is a USDA loan worth it?
A USDA loan is often worth it for people who qualify. USDA loans charge lower interest rates than conforming mortgages, and they have more lax credit score and down payment requirements. This means it’s both easier and more affordable to choose a USDA loan.
These loans are limited to homes in rural areas, though. You may not feel it’s worth it to live in a small town just to get a USDA loan. You might prefer an FHA loan, which is also for people with low credit scores but more widely available.
Experts’ advice on choosing a USDA loan lender
We consulted mortgage and financial experts to inform these picks and provide their insights about mortgage lenders.
Insider
Anthony Park, author of “How to Buy Your Perfect First Home”Lauryn Williams, certified financial planner, founder of Worth Winning Financial PlanningJulie Aragon, mortgage broker, founder of Aragon Lending TeamLaura Grace Tarpley, certified educator in personal finance, editor of banking and mortgage at Personal Finance Insider
Here’s what they had to say about USDA mortgages. (Some text may be lightly edited for clarity.)
How can someone decide between a conventional mortgage vs. a government-backed mortgage, like a USDA loan?
Laura Grace Tarpley, Personal Finance Insider:
“A USDA loan is a great option if you earn a relatively low income and want to buy a home in a rural area. If you don’t meet both of these criteria, it’s not the right type of mortgage for you.”
What factors should someone take into consideration when choosing a mortgage lender?
Anthony Park, author:
“The canned answer is to just go with the lowest rate. However, you also want to take into account who’s going to serve your loan best. Are repayments going to be easy for you? Who is most likely to be able to help you if you need to take out a HELOC or refinance later, versus somebody who’s more of a one-off type?
“They may have the lowest rates to get you involved, but they might have very, very little hand holding after the fact. I wouldn’t recommend paying an exorbitant amount more for potential services in the future, but just don’t always necessarily go with the rock-bottom lowest rate. There’s sometimes a cost with that.”
How can someone know whether they’re financially ready to buy a home?
Lauryn Williams, CFP:
“You should have funds left over after everything is said and done as it pertains to purchasing the home. So if you don’t have an emergency fund plus a down payment, you’re probably not ready to purchase a home. Another thing I think about is credit card debt. While you can be approved for a mortgage with credit card debt and student loans and very little cash on hand, you put yourself in a very risky situation.”
Julie Aragon, Aragon Lending Team:
“You should have enough money for a down payment and closing costs. You don’t have to have any reserves — you can have no money in the bank. But that doesn’t mean you should have no money left over after your down payment and closing costs. I like to say it’d be good to have three to six months of expenses saved after down payment and closing costs. That might be a good sign that you’re ready.”
Mortgage rates by state
Check the latest rates in your state at the links below.
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Utah
Vermont
Virginia
Washington
Washington DC
West Virginia
Wisconsin
Wyoming