United States Department of Agriculture (USDA) Home Loans

USDA-RD Overview

The real estate space is broad, diverse, and varies greatly based upon each individual’s unique credit, income, and regional circumstances. The USDA Home Loan Program is designed with this breadth and diversity in mind, specifically where rural housing is concerned.

The USDA Rural Development Loan is intended to increase homeownership in rural regions of the country. Guidelines are fairly straightforward as far as what qualifies as “rural” and which zip codes are eligible for USDA-RD consideration. RD loans also apply to certain small town and suburban communities, in addition to traditional farmsteads and country homes.

The programs are making a big splash throughout the national economy, which should be encouraging for potential homebuyers living in eligible areas.


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The purpose of USDA Home Loans is to provide “…low- and moderate-income households the opportunity to own adequate…safe, and sanitary dwellings as their primary residence in eligible rural areas.” In other words, USDA-backed loans are geared towards extending homeownership to regions beset by economic hardship and to the individuals inhabiting them.

Eligibility Requirements

USDA loans come with some eligibility requirements. These include but are not limited to income requirements, property criteria (i.e. is location rural), and citizenship requirements. You must also clearly demonstrate your intention of occupying the property as your primary residence.

Furthermore, the USDA loan funds may be used to improve the overall homeownership environment of those rural areas. Refinancing, repairs, “purchasing and installing measures to promote energy efficiency,” and carpeting and heating/cooling equipment are all acceptable uses for those funds secured via USDA Home Loan approval. The program’s aim “…to helping improve the…quality of life in all of rural America…” is realized one approved loan at a time.

Some USDA Rural Development Home Loan benefits include some excellent features such as the following:

  1. 100% financing (based on home appraisal) over 30 years
  2. Permission of gifts/grants on 30-year fixed-rate (based on location)
  3. No restrictions for first-time buyers
  4. No requirement for post-closing reserves

These terms ensure that even those earning fairly low to middle incomes will not be ruled out of USDA Home Loan consideration. The program is intended to create favorable loan terms for those who might otherwise not qualify under standard lender criteria. Similar to VA home loans, the USDA Rural Development program eliminates many of those hurdles. Take advantage of these favorable terms and enter the housing market with confidence.

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USDA-Approved Communities

The USDA-RD program applies to rural areas and to certain suburban towns as well. In the latter case, the suburb must have a population of less than 20,000 to be considered eligible for USDA RD. This means that many suburbs that might not seem traditionally rural are actually USDA RD eligible. Because the USDA Home Loan program was passed in 1991, it was the previous year’s census that was used in determining which regions would meet the criteria.

And though many of the originally approved areas have grown and/or urbanized to some extent, many continue to meet the USDA-RD eligibility standards. These standards are not set in stone, however, and the possibility of a change to the existing eligibility boundaries is very real. But for the time being, your community may be perfectly in line with USDA Home Loan eligibility requirements. One of our knowledgeable mortgage consultants will be happy to assist you with eligibility verification.

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At On Q Financial, Inc. we pride ourselves on our “Mortgages Simplified™” approach and work relentlessly to make homeownership a reality for buyers in rural regions and the small towns therein. Reach out to an On Q Mortgage Consultant with your questions, or take a look at the USDA Rural Development information to better understand where you are in terms of eligibility.


About the Author

Before opening On Q Financial in 2005, John Bergman originated and funded 450 units a year as a loan officer. He founded the company with just $1M of personal life savings—committed to his vision for building the best independent mortgage organization in the industry.

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