Key takeaway
USDA eligibility depends on the property and household as well as repayment ability and lender review.
What is a USDA home loan?
The Rural Housing Service, part of the U.S. Department of Agriculture, runs mortgage programs that help low- and moderate-income buyers purchase, build, or repair homes in eligible rural areas, the CFPB explains. It guarantees loans made by approved lenders and, in a separate program, lends directly to qualified borrowers. The guaranteed loan usually requires no down payment. Whether it works for you depends on the property’s location, your household income, and a lender that offers the program.
Two programs with the same name
The Single Family Housing Guaranteed Loan Program is the one most buyers mean: an approved lender makes the loan, and USDA guarantees it, so the lender can offer terms it otherwise could not, including no down payment. The Single Family Housing Direct Home Loan is different: USDA itself is the lender, it is aimed at low- and very-low-income applicants, and it is applied for through USDA, not through a bank or loan officer.
This page is about the guaranteed program, because that is what a mortgage loan officer can help you with. If your income is well below the area median, ask whether the direct program might fit, and contact the USDA Rural Development office for Maryland about it.
The address has to be in an eligible area
Eligibility is decided by the property’s location, not by how rural it looks. USDA publishes an online eligibility map, and in Maryland large parts of the Eastern Shore, Western Maryland, Southern Maryland, and the edges of the Baltimore and Washington suburbs qualify, while the cities and most of the close-in suburbs do not. The map changes as census data updates, so check the exact address.
Ask your loan officer to run the address before you write an offer. A house two miles from an eligible one can be outside the line.
Income limits, and who the program is for
USDA sets a maximum household income for the guaranteed program by county and household size, generally around the area’s median income adjusted upward. Everyone living in the home counts toward that limit, not only the borrowers. The home must be your primary residence and meet USDA’s property standards.
The program was built for moderate-income families who can afford a monthly payment but have not saved a down payment. If your income is above the limit, a conventional or FHA loan is the path; the down payment guide on this site compares the minimums.
| Requirement | Guaranteed loan | Where to check |
|---|---|---|
| Location | Eligible rural area on USDA’s map | USDA eligibility map, run by your loan officer |
| Household income | At or below the county limit for your household size | USDA income limits for Maryland |
| Down payment | Usually none | Your Loan Estimate |
| Occupancy | Primary residence | Loan application |
What it costs instead of a down payment
There is no private mortgage insurance, but USDA charges a guarantee fee: an upfront fee that is usually added to the loan amount and an annual fee paid in monthly installments. The CFPB lists USDA among the options that let you buy without a 20 percent down payment; the guarantee fee is the price of that.
You still pay closing costs, prepaid taxes and insurance, and the escrow deposit, and in Maryland the transfer and recordation taxes. In some cases closing costs can be financed if the home appraises above the price, but count on bringing money to closing until the Loan Estimate says otherwise.
How to start
Only USDA-approved lenders can make guaranteed loans, so the first question for any loan officer is whether the lender offers the program. Ask that on the first call, along with the eligibility check for the address and the income limit for your county. In Maryland, Paola takes that call at New Priority Lending Corp.; the contact form here only asks her to call you.
Nothing on this page approves you for a USDA loan or confirms that a particular property or lender qualifies. The USDA program pages listed below are the official source for the current rules, and they change.
- Does the lender offer USDA-guaranteed loans?
- Is this exact address in an eligible area today?
- What is the income limit for my county and household size?
- What is the guarantee fee, and how does the payment compare with FHA and conventional?
Primary sources
This guide is based on the following official consumer resources. Your loan documents, your lender’s requirements, and the law that applies decide your individual situation.
- Consumer Financial Protection Bureau — What is a USDA Rural Housing Service loan?
- USDA Rural Development — Single Family Housing Guaranteed Loan Program
- USDA Rural Development — Single Family Housing Direct Home Loans
- USDA Rural Development — Maryland state office
- Consumer Financial Protection Bureau — What kind of down payment do I need?
About the author
Paola Sharleen Valdez · Mortgage Loan Officer · NMLS ID #2796757
Paola Sharleen Valdez is a Mortgage Loan Officer with New Priority Lending Corp. She writes these guides so you know what to expect, what to ask, and what you will need before you decide to start a loan with her.