The current average interest rate on a 30-year USDA home loan is 6.048%, according to mortgage technology and data company Optimal Blue. If you’re looking to purchase a home in an eligible rural area, this type of government-backed mortgage might be right for you.
Learn more: How to buy a house, step by step.
Time PeriodRateCurrent USDA loan rate (average)6.048%USDA loan rate a week ago (average)6.212%USDA loan rate a month ago (average)6.455%Current USDA loan rate (average)6.048%USDA loan rate a week ago (average)6.212%USDA loan rate a month ago (average)6.455%
As you can see from the data, USDA loan rates follow conventional loan rates pretty closely—only they’re consistently lower. According to The Mortgage Reports, USDA rates tend to consistently hover around 0.5% to 0.75% lower than many other mortgage programs, including conventional loans and even FHA loans.
Here’s how rates have trended recently, per Optimal Blue data.
On that note, let’s see how USDA rates stack up to the other federally backed loan types that you might also qualify for.
Historically, USDA loan rates tend to fall right below FHA rates and right above VA loan rates. While they may appear identical to the naked eye, we can see the disparity in full display during the pandemic years—while FHA loan rates spent roughly 3.5 straight months below 3% in late 2020/early 2021, USDA rates spent approximately months there. VA loan rates, meanwhile, spent over 17 months consistently below 3%, with the exception of one brief blip in March 2021.
But even though VA loans may appear to be the “cheapest” on paper, keep in mind that your interest rate for each eligible loan type will heavily vary based on numerous factors including your credit score, debt-to-income (DTI) ratio and more.
Plus, not all loan types have the same down payment requirements. FHA loans typically require 3.5%, while VA loans may require no down payment at all. So which camp do USDA loans fall into?
Learn more: Guide to first-time homebuyers programs and loans.
No.
While it’s possible to get a USDA loan with no down payment, you’ll still have other closing costs to account for when you go to sign the papers and get the keys.
Here are just some of the most common closing costs associated with USDA loans.
Guarantee fee: This can more or less be consideredto take the place of mortgage insurance—and it helps support the program as a whole. The USDA charges a “guarantee fee” of 1% of the loan amount at closing and 0.35% annually thereafter.
Appraisal fee: This compensates your appraiser, who assessed the true market value of the home for you and your lender during due diligence.
Origination fee: This compensates your lender and usually comes to around 1% of the loan amount.
Taxes and insurance: You’ll have to pay property taxes and an annual home insurance premium at closing, too.
Escrow funds: This is a “reserve fund” to cover extra unseen expenses.
You may also have to pay title fees, credit reporting fees, home inspection fees and more. For a more complete list, check out our guide on closing costs when buying a house.
But the bottom line is this: closing on a home funded by a USDA loan will typically cost you between 3% and 6% of the home’s sale price. That’s a tick higher than the usual 2% to 6% on a conventional loan since conventional loans don’t have guarantee fees.
If you’re light on cash to cover up to 6% in closing costs, a down payment assistance (DPA) program might be able to help.
USDA loans have a mix of location- and income-based requirements. Here are the general highlights:
Location. The property itself must fall into a USDA-eligible area. Folks often misconstrue this to mean “deep into farmland,” when in reality, well over 95% of the U.S. falls within USDA-eligible boundaries. You can see for yourself by looking at the map. Heck, even suburban parts of Philadelphia and Fresno qualify as USDA-eligible.
Income. Next, your household income must be no more than 115% of the adjusted median family income for the area. You can find that number for the areas you’re searching by downloading the corresponding PDF for your state from the USDA’s website.
Credit score. The USDA generally prefers a 640+ credit score to apply for a USDA loan. That said, the agency can make exceptions for select applicants with verifiable income, consistent rent payments and more.
Debt-to-income. In addition to solid credit, you’ll need a debt-to-income (DTI) ratio of 41% or less to apply for a USDA loan.
Move-in ready. Interestingly, you cannot use a USDA loan to buy a fixer-upper in need of drastic improvements. The program has strict requirements about the current state of the home, from functioning plumbing to a zero/low risk of infestation. It must be “structurally sound and functionally adequate,” and in essence, move-in ready.
Only home. Finally, you must be prepared to move into the home and treat it as your primary residence. You cannot use a USDA loan to purchase a second/vacation home or rental property.
Learn more: Financing options when buying an investment property.
If your credit score falls below the 640 needed for the best chance of approval for a USDA loan with a low interest rate, review our guide on buying a home with bad credit to better understand your options. And, if you have some time before you need to actually purchase a home, consider taking steps to improve your credit first.
Even if you qualify, a USDA home loan may not be the right fit for your home-buying goals. There are both pros and cons to consider for this special type of loan, so let’s recap them here:
Pros
Low interest rates. Though it varies by borrower, you’ll typically score a lower interest rate on a USDA loan than you would on a conventional loan or even an FHA loan in many cases.
No down payment. USDA loans do not have minimum down payments, which could save you $10,000+ in cash due at closing compared to FHA loans (3.5%) and conventional loans (3%).
More eligible locations than you might think. While the term “USDA” may evoke images of tractors and rural farmland, in truth, you can find USDA-eligible properties in most major suburbs.
Cons
Potentially high closing costs. USDA loans require 1% “guarantee fees” on top of the usual 2% to 6% closing costs, so the cash due at closing may be higher than expected.
Income limits. If your household income is above 115% of the median for the area, you likely won’t qualify for a USDA loan.
Never stop paying for “insurance.” While a USDA loan’s annual guarantee fee (0.35%) is far cheaper than private mortgage insurance on a conventional loan (generally ~0.5% to 1.5%), homeowners with conventional loans get to cease PMI payments once they reach 20% ownership. USDA borrowers, meanwhile, pay 0.35% until the loan is paid off.
Historically, 30-year, fixed rates for USDA loans have followed conventional loan rates extremely closely. That means they plummeted during the pandemic, hovered around 3% as the Federal Reserve tried slowing the economy, and have since risen to a “healthy” ~6% (healthy meaning better for the economy as a whole—if not the individual homebuyer).
Even though rates for both USDA and conventional loans rose in 2024, experts predict a “cooling off” period throughout 2025. Between the Mortgage Bankers Association and Fannie Mae itself, authorities in the space tend to agree that rates for conventional mortgages will hover around 6% throughout the year.
That means USDA rates could hover in the ~5.5% to 5.8% range, if history is any indicator.
Here’s a look at historical rate trends as presented by the Federal Reserve Bank of St. Louis (FRED).
But falling rates aren’t necessarily a big red stop telling you to wait. There may be more competition/less inventory when rates drop, and buying sooner means building equity sooner. Point is, there are dozens of factors that play into the “when to buy” discussion, and the best person to help you get the timing right is your lender.
Speaking of lenders, you should know that not everyone offers USDA loans. So how do you find a lender that does?
Let’s first differentiate between USDA direct loans, which are issued directly by the government agency, and USDA guaranteed loans, which are backed by the government but issued by a private lender.
If you’re looking for the former, you’ll go through the local Rural Development Service Center. But if you want the more common guaranteed loan, you’ll seek out a private lender such as a bank or credit union.
To make things easy, the USDA has a complete list of Active Lenders that have “recently” originated USDA loans. At the time of this writing the list is in the vicinity of 185 strong, so you should have multiple options for your state.
To help you choose, consider that smaller lenders tend to be more agile and responsive than big banks. Plus, like many real estate professionals, local lenders tend to work longer hours outside of a regular 9-5 to get the job done and help you close on time.
While it certainly doesn’t hurt to start a high-level conversation with a lender on this list, one of the best ways to find the right lender for you is to go old school: simply ask your REALTOR or a fellow borrower for a referral.
USDA home loan rates tend to consistently fall below conventional home rates, and contrary to popular belief, you can find many USDA-eligible properties in both rural areas and major suburbs.
There are drawbacks to USDA loans, of course—they have income caps, potentially high closing costs and a “guarantee fee” you never stop paying—but on the whole, the pros tend to outweigh the cons for many borrowers.
So if you’re looking for homes in a rural or suburban area, it’s worth connecting with a REALTOR and/or lender to discuss your options.
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