As more people flock to suburbs and major cities, the rural communities in the nation are often left with a dwindling economy and lower job opportunity. Because of this, families in rural areas typically have a lower income vs a family living in a popular suburb with a booming economy.

The USDA loan is designed to help lower income families in rural communities, because of it’s zero down payment requirement.

The USDA loans are issued through the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture.

What is a USDA loan?

The USDA loan program consists of three different kinds of loans.

Home improvement loans and grants

Much like the conventional renovation loan, the USDA also offers an option for those who would like to or need to update/repair their home.

This program can also combine a loan and a grant for increased amounts.

This is perfect for those in an older community where the standard of housing is very low and their options are bleak whether they stayed in their current home or left.

Loan Guarantees

This is when the USDA guarantees a mortgage issued by your lender, and needs to be a local lender. This will ensure that you get low mortgage interest rates and can do so even if you don’t have a down payment.

That guarantee acts as a form of insurance protecting USDA lenders, so they’re able to offer below-market interest rates and zero-down home loans.

Direct Loans

Designed for the low and very low-income applicants, direct loans will vary by region and income requirements will differ.

Thanks to Uncle Sam, subsidies are the reason that interest rates for these loans can be as low as 1%!


How Do I Qualify?

Like other loans, the USDA loan income limits will vary based upon your location. Each county is different and sets their own limitations. This will also depend on the size of your household.


The applicant is required to have steady income, but you cannot make more than 15% of the median income in your county.

Home as primary residence

The property for this loan needs to be your primary residence and not a rental home or a second home.

Credit Score

An applicant needs to have at least a 640 credit score to qualify, although this can vary per lender at their discretion.


Applicants cannot surpass 41% of a debt-to-income ratio. This is due to trusting an ability to pay back the loan, if your debt is too high compared to your income it will look like you will not be able to pay your mortgage.

Where Do I Need to Live?

You’ll need to reside in what is categorized as a rural area and is known as a town with less than 20,000 residents.

Important to know

PMI is included in USDA loans

You can find a more in depth dive into what PMI is here if you don’t have a solid understanding of it.

If you know what it is, we know you just took a deep breath of disappointment. But don’t worry, mortgage insurance is actually much lower than if you were to have an FHA loan or conventional loan.

The buyer will need to front 1% of the entire loan as an insurance cost, and will then have an added monthly payment of that mortgage insurance wrapped up into the mortgage payment.

This is where it gets good.

FHA loans typically have .85% annual fee for mortgage insurance, and conventional loans even up to as high as 1% and sometimes higher.

But, the USDA loan only has a .35% annual fee, based upon the remaining principal balance on the mortgage.

This just means that your mortgage insurance payment which is included in your monthly payment will be much lower than it would be otherwise.

Mortgage rates are lower with USDA loans

USDA interest rates are among the lowest of any other kind of loan. Typically, they can even be an entire 1% lower than your more common loans.

The better your credit score, the lower your rate, BUT the USDA loan is meant to help those with lower incomes and those with scores as low as 640. This helps so much for those who are struggling financially and need a home!

If you meet the other requirements but your credit score just isn’t quite at 640, please call us. We’d love to sit down and help you come up with a plan to bring your credit score up!


Living in East Tennessee can be tricky for some. Although Maryville is not a town of less than 60,000 people, we know there are many towns in the region that are!

It’s important to us that we serve those who need these kinds of loans the most and many people do not know they exist.

We’re thankful our nation has programs like this to cater to small town folk who are the backbone of this great country.