1. What is a USDA Loan?

A USDA loan is a mortgage loan offered to rural property buyers by the United States Department of Agriculture. It features no down payment requirement, competitive interest rates, and lower mortgage insurance costs compared to conventional loans.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

• \( P \) — Loan principal amount ($)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Total number of monthly payments

Explanation: The formula calculates the fixed monthly payment required to fully amortize the loan over its term.

3. Benefits of USDA Loans

Details: USDA loans offer 100% financing, lower mortgage insurance rates than FHA loans, and flexible credit guidelines. They're designed to help low-to-moderate income borrowers purchase homes in eligible rural areas.

4. Using the Calculator

Tips: Enter the loan amount in dollars, interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Who qualifies for a USDA loan?
A: Borrowers must meet income limits (typically up to 115% of area median income), purchase in eligible rural areas, and intend to use the home as a primary residence.

Q2: What are the current USDA loan rates?
A: Rates vary but are typically 0.5% to 1% lower than conventional loan rates. Check with approved USDA lenders for current rates.

Q3: What is the USDA guarantee fee?
A: USDA charges a 1% upfront guarantee fee (can be financed) and 0.35% annual fee (paid monthly), both lower than FHA mortgage insurance.

Q4: What property types are eligible?
A: Single-family homes, approved condos, and modular/PUD homes in USDA-eligible rural areas. Check the USDA eligibility map.

Q5: Are there credit score requirements?
A: Most lenders require minimum 640 FICO score, though USDA itself doesn't set a minimum. Compensating factors may allow exceptions.