USDA loans

Where it actually applies

Large parts of DeSoto, Tate, Marshall, Tipton and Fayette County fall inside USDA eligible boundaries. So do plenty of subdivisions that look and feel suburban.

The boundaries are drawn by the USDA and they are specific to the address, not the county. A house on one side of a road can qualify while the one opposite does not, which is exactly why it is worth checking rather than assuming.

• No down payment inside eligible areas
• Annual fee of 0.35%, cheaper than FHA's
• Income limits apply by household size and county
• The 1% guarantee fee is financed into the loan

How it compares with FHA

For a buyer who qualifies on income and is buying in an eligible area, USDA usually costs less than FHA: nothing down against 3.5%, and a 0.35% annual fee against FHA's higher one.

The trade is the income limit and the geography. FHA has neither restriction, which is why the two get compared constantly and why the right answer depends on the address and the household.

The income limit catches people out

USDA caps household income relative to the area median, adjusted for household size. It counts the income of adults in the household, not only the borrowers.

That surprises people, and it is worth establishing early rather than after an offer is accepted.

Questions people ask