United States Department of Agricultural (USDA) loans are zero-down-payment mortgages, with low interest mortgages, for rural and suburban home buyers. Yes, even in California there are areas that qualifies for USDA home loans.

USDA loans have been around since 2007 and are officially part of the USDA Rural Development Guaranteed Housing Loan Program.

There are three different types of USDA loans.

-1- Loan Guarantees: The USDA guarantees a mortgage issued by a participating lender — similar to an FHA loan and VA-backed loans — allowing you to get low mortgage interest rates, even without a down payment. However, if you put little or no money down, you will have to pay a mortgage insurance premium.

-2- Direct Loans: These loans are issued by the USDA; i.e., USDA is the lender, instead of a bank. They are for low and very low-income applicants. Income thresholds vary by region. With subsidies, interest rates can be as low as 1%.

-3- Home Improvement Loans and Grants: These loans or outright financial awards permit homeowners to repair or upgrade their homes. Packages can also combine a loan and a grant, providing up to $27,500 in assistance.

Qualifying for a Guaranteed USDA Loan

To qualify for a guaranteed USDA loan, you must meet the following requirements:

1: Be a U.S. Citizen, U.S. non-citizen national or qualified alien

2: Have income at or below the set “low” income in the area you intend to live in

3: Agree to set the dwelling as a primary residence

4: Have the legal capacity to incur the loan obligation

5: Have not been suspended or debarred from participation in federal programs

6: Demonstrate the willingness to meet credit obligations in a timely manner

7: Purchase a property that meets all program criteria

The USDA sets no official mortgage amount limits for guaranteed loans. Your income and market rates in the location where you plan to settle determine your loan amount.