USDA loans allow 0% down — 100% financing — but only for a primary home in a USDA-eligible area with household income at or below 115% of the area median. FHA works in any location with a 3.5% minimum down payment and more forgiving credit guidelines. Conventional loans have no location or income test and tend to favor stronger credit. Many buyers who qualify for USDA should still compare it against FHA or conventional before choosing.
USDA vs. FHA vs. conventional at a glance
Most comparisons stop at down payment. That's the headline difference, but the rules about where you can buy and who counts toward income are what actually decide whether USDA is on the table. The table below lines them up.
| Feature | USDA Guaranteed | FHA | Conventional |
|---|---|---|---|
| Down payment | 0% down (100% financing) in eligible areas | 3.5% minimum with a 580+ score; 10% with 500–579 | Low-down-payment options exist for qualified buyers; more down changes pricing and mortgage insurance |
| Where you can buy | Only USDA-eligible (mostly rural and small-town) areas | Anywhere | Anywhere |
| Income limit | Household income at or below 115% of area median | None | None for standard loans (some special programs have caps) |
| Whose income counts for the limit | Every adult in the household, including non-borrowers | Borrowers only | Borrowers only |
| Credit | 640 commonly used for streamlined GUS review; lower scores may be manually underwritten | 580+ for the minimum down payment; 500–579 with 10% down | Generally higher minimums, and pricing is more sensitive to score |
| Mortgage insurance / fees | Upfront guarantee fee (can be financed) plus an annual fee paid monthly | Upfront MIP (can be financed) plus annual MIP; often lasts the life of the loan | Private mortgage insurance with less than 20% down; can generally be removed later |
| Occupancy | Primary residence only | Primary residence only (1–4 units) | Primary, second home, or investment |
| Loan limits | No set maximum; income and repayment ability cap the amount | County FHA limits | Conforming limits set annually; jumbo above that |
| Seller concessions | Up to 6% | Up to 6% | Varies with down payment and occupancy |
Guidelines are general and current as of this update. USDA rules and eligibility maps change, and lenders can layer on their own requirements — Matthew will confirm what applies to your file.
Which program should I look at first?
Answer a few questions to see whether USDA deserves the first look, or whether FHA or conventional should lead the comparison.
Is the home you want in a small town, rural county, or on the outer edge of a metro area?
Will you live in the home as your main residence?
Is your total household income — every adult who will live there, not only borrowers — likely moderate for your county?
Would you rather keep your savings than put money down?
Has your credit been mostly on time for the past year?
Your answers stay in your browser — nothing is saved or sent. This is a quick orientation, not a loan decision.
Location and household income: the USDA gatekeepers
FHA and conventional loans don't care whether a house sits downtown or at the end of a county road. USDA does. A USDA Guaranteed loan requires a property inside an area Rural Development has mapped as eligible, and that map includes far more than farmland — plenty of small towns, newer subdivisions, and the outer rings of growing metros qualify. The only reliable way to know is to enter the exact address at USDA's property and income eligibility site or read the walkthrough on the USDA eligible areas map page.
The second gate is household income. USDA looks at the combined income of every adult who will live in the home, even people who won't be on the loan, and compares it to 115% of the county's median. Allowable deductions — for dependents, childcare, and elderly or disabled household members, among others — can bring a household under the line that looked too high at first glance.
- Example: a couple applying together whose adult child lives with them and works full time. That child's pay counts toward the USDA household limit even though only the parents sign the loan. With FHA or conventional, it wouldn't.
- Example: a family of five with a single earner in an eligible county. Larger households generally get a higher limit, and dependent deductions help further.
If either gate closes, that's not a dead end — it just means FHA or conventional should lead the comparison.
Want a straight answer for your situation? Skip the call center — Matthew will check the address, household income, and USDA options himself.
Talk with MatthewHow credit guidelines compare
USDA files generally run through GUS, USDA's automated underwriting system. A 640 score is commonly used as the threshold for streamlined GUS credit review, while files below it may still be approved through manual underwriting with stronger documentation. Lenders can add overlays on top of that. See USDA credit requirements for waiting periods and non-traditional credit.
FHA is usually the most forgiving of the three on score: 580 and above for the 3.5% minimum down payment, and 500–579 with 10% down, per HUD guidelines. Conventional loans typically expect higher scores, and credit has a bigger effect on how a conventional loan is priced.
Mortgage insurance and the USDA guarantee fee
None of these programs is free of insurance-type costs when you put little or nothing down; they just structure them differently.
USDA
An upfront guarantee fee that can usually be rolled into the loan, plus an annual fee collected in monthly installments. There's no separate private mortgage insurance. Current fee levels are published by USDA.
FHA
Upfront and annual mortgage insurance premiums (MIP). With less than 10% down, annual MIP generally stays for the life of the loan; with 10% or more, it generally ends after 11 years.
Conventional
Private mortgage insurance applies with less than 20% down. It can generally be canceled once enough equity builds, and its cost depends heavily on credit and down payment.
Which one costs less over time depends on your credit, your down payment, and how long you expect to keep the loan. That comparison is exactly what a conversation with Matthew is for; this site doesn't quote fee amounts.
Property rules and loan limits
USDA finances primary residences only, and the property can't be set up to generate income — no working farm, no rental unit, though a detached garage or shop is generally fine. Condos, townhomes, and some manufactured homes can work when they meet agency standards. The home must pass an appraisal against HUD-style property standards. Details are on USDA property requirements.
FHA also requires owner occupancy but allows 1–4 unit properties, which makes it a common choice for buyers who want to live in one unit and rent the others. FHA loan amounts are capped by county; check HUD's FHA mortgage limits lookup.
Conventional is the flexible one: second homes and investment properties are allowed, and the loan amount follows conforming limits, with jumbo financing above them.
USDA has no published maximum loan amount for the Guaranteed program. In practice, the household income limit and your debt-to-income ratio set the ceiling.
Four scenarios: which program leads?
- Teacher buying in a county-seat town. Moderate household income, modest savings, good credit, and the address shows as eligible. USDA's 0% down structure likely leads, with FHA priced alongside for comparison.
- Nurse buying a condo downtown. The address isn't USDA-eligible. FHA or conventional leads depending on credit and savings — see FHA Express Loans.
- Two-earner household just over the USDA income limit. Deductions may bring them under; if not, FHA or conventional is the path. Neither has an income cap.
- Army veteran looking at acreage outside a small city. USDA may fit, but a VA loan also allows no down payment without a location test — compare both at VA Express Loans.
Every scenario above is simplified. Credit history, debts, and the property itself can change the answer, which is why a real side-by-side beats a rule of thumb.
Getting a real side-by-side from Matthew
Matthew works as a mortgage broker, so he isn't limited to one program. Send him the address you're considering and your household picture, and he'll check USDA eligibility and income limits, then compare what USDA, FHA, and conventional would each require of you — down payment, cash to close, and ongoing costs — in plain English. Matthew holds licenses in several states, not all of them — tell Matthew where you're buying and he'll confirm he can help there.
Start with USDA loan eligibility or USDA loan requirements if you want more background first.
Frequently asked questions
Is a USDA loan better than an FHA loan?
Not automatically. USDA allows 0% down, but only in eligible areas and under household income limits. FHA works anywhere with a 3.5% minimum down payment and more flexible credit guidelines. The better choice depends on the address, your household, and your credit.
Can I switch from FHA to USDA if the address turns out to be eligible?
Often, yes, before you're far into the process — the loan type can generally change with a new application and disclosures. Checking eligibility before you write an offer avoids the scramble.
Does conventional financing ever beat USDA for a zero-down-minded buyer?
Sometimes. A buyer with strong credit and some savings may find a low-down-payment conventional loan competitive, especially since private mortgage insurance can generally be removed later. Matthew can compare both.
Do USDA and FHA have the same property standards?
They're similar. USDA appraisals generally follow HUD-style property standards, so homes that raise safety or soundness concerns can need repairs under either program.
I'm a veteran. Should I skip USDA?
Not necessarily — but VA loans also allow no down payment and have no location or income test, so they deserve a look. See VA Express Loans for the VA side.
Ask Matthew about your USDA home loan
Tell Matthew a little about the property and your plans. He'll follow up by phone or email — no obligation.
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