USDA Loan Requirements in 2025

Brokers are often asked: “Who qualifies for a USDA loan?” This question arises as the requirements might be nuanced and confusing for borrowers. For example, they might have issues calculating their household income correctly or checking whether it falls within the limits.  This guide explains the 2025 USDA loan eligibility requirements, so that you can guide clients quickly and confidently. We cover income, credit, and location criteria, providing short and clear answers to your clients’ most common questions. 

USDA Loan Basics for Brokers

USDA loans are offered through the U.S. Department of Agriculture’s Rural Development program to support housing, infrastructure, and community development in rural and suburban areas. The key features of these loans include:  

• USDA loans are zero-down-payment, government-backed mortgages that offer affordable loan terms, making homeownership more accessible. 
• Two main types of USDA loans are guaranteed and direct. Guaranteed loans are issued by approved lenders, and the USDA guarantees up to 90% of the loan if the borrower defaults. Direct loans are funded and serviced by the USDA. 
• USDA loans are designed for low- and moderate-income borrowers who may not otherwise qualify for traditional loans.  

Income Eligibility

Income limits depend on the location and household size. Generally, to qualify for USDA loans, the household income must not exceed 115% of the area median income (AMI).  

It is important to note that USDA considers total household income, meaning the combined income of all adults over 18 years of age living in the home. However, certain deductions are allowed, including childcare and medical expenses. 

USDA updates income limits for its programs annually, usually in the spring or summer. For 2025, the USDA loan income limits were increased in many counties due to the growth in median household income.  

Location and Property Requirements

The loans are available only for properties located within rural or suburban areas, defined by the USDA. To confirm whether the address fits location requirements, brokers can use the official USDA eligible areas map. 

Under USDA loan residency rules, the property must be the borrower’s primary residence, and secondary homes or investment properties are not eligible. Beyond the occupancy requirement, the home must meet the minimum property standards (MPS) for safety, structure, and habitability. 

While meeting these criteria, the range of eligible housing is broad, as it includes: 

• 1-unit single-family homes 
• USDA-approved condominiums 
• Planned Unit Developments (PUDs) 
• Manufactured homes, while meeting certain criteria 

Credit and DTI Requirements

The USDA does not set minimum credit score requirements for their programs. However, lenders apply their own overlays, mostly requiring a FICO of 640 or higher. Lower credit score profiles may still qualify, but the application must go through manual underwriting and present compensating factors. 

For the debt-to-income (DTI) ratio, the USDA also doesn’t set the maximum value. Yet, 41% is typically the threshold for automatic underwriting “Accept/Approve” results. Going over this number often triggers a “Refer” or manual underwriting. 

Strong compensating factors may make up for the higher DTI, such as: 

• Good credit history 
• Sufficient cash reserves 
• Stable employment history and income track record 
• Significant residual income 

Other Borrower Requirements

Apart from mentioned rules, the USDA imposes other requirements on borrowers in order to qualify for the loans. They are less known among borrowers, yet they must be considered when checking eligibility. 

• Regarding citizenship status, the borrower must be a U.S. citizen or permanent resident. This must be verified with valid documentation, which the lender includes in the loan file. 
• All borrowers must intend to occupy the home as their primary residence, meaning that non-occupant co-signers and co-borrowers are not allowed. Income-producing properties or vacation homes are prohibited. 
• The USDA requires at least one valid credit score. If the borrower doesn’t have a credit score, nontraditional credits (such as rent and utility bills) may be considered, but this approach requires more documentation and manual underwriting.
  Many lenders’ overlays prefer at least two credit scores from major bureaus with 12-month credit history for automatic underwriting, though guidelines vary. 

Why Brokers Should Care

For brokers, having USDA loans in a portfolio is an option to close more deals, while helping more clients fulfill the dream of owning a house. Here are three reasons how providing USDA loans can be beneficial: 

• Expanding Pipeline with Undeserved Clients. USDA loans can reach a wider audience, including borrowers who do not have sufficient savings for a down payment or are ineligible for conventional loans due to USDA loan DTI requirements or credit limitations. Additionally, USDA allows gift funds to cover closing costs, which can be a convenient option for those with family support. 
• Presenting a Strong Alternative for FHA and Conventional Loans. When traditional mortgage options don’t fit, USDA loans can be a more affordable option as they don’t require a down payment or PMI. Instead, the borrower must pay a USDA guarantee fee – 1% of the loan amount is paid upfront (this can be financed) and an annual fee of 0.35% of the remaining balance is paid together with monthly payments.
  Beyond affordability, USDA loans offer more flexible requirements in terms of income and credit scores. 

FAQ: USDA Loan Requirements

What Income Qualifies for USDA Loans in 2025?

The USDA annually sets income limits that vary depending on the location and household size. Generally, the household income – meaning combined income of all adults living in the home – cannot exceed 115% of the area median income (AMI) for the property’s location. 

What Credit Score Do I Need for USDA Loans?

Although there is no official USDA loan credit score requirement set by the program, lenders may apply their own overlays. Most lenders require a credit score of at least 640.

Can You Buy a Condo or Manufactured Home with a USDA Loan?

Yes. USDA loan property requirements allow a wide range of housing types, including one-unit single-family homes, condominiums in USDA-approved projects, and manufactured homes that meet certain standards. 

Do USDA Loans Require PMI?

No. USDA loans do not require private mortgage insurance (PMI). Instead, the borrower must pay guarantee fee that consists of two parts – an upfront fee of 1% of the loan amount and an annual fee of 0.35% of the remaining loan balance. 

How Do I Check if a Property is USDA Eligible?

The property must meet the USDA primary residence rule, meaning the borrower must intend to occupy the house for the majority of time. Apart from occupancy, the property must be in eligible rural or suburban areas. 

Key Takeaways

• USDA loans open homeownership to low- and moderate-income borrowers in rural and suburban areas. 
• Eligibility hinges on income, location, credit, and property rules.  

Conclusion

USDA loan eligibility requirements are more flexible than for traditional mortgages, helping a wider audience of borrowers to achieve homeownership and build wealth. 

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