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Short answer
USDA guaranteed loans are for eligible homes in USDA-designated rural areas and for households whose income is no more than 115% of the area median, while FHA loans have no location or income limits but cap the loan amount by county. USDA offers 100% financing, so no down payment is required, and charges a 1.00% upfront guarantee fee plus a 0.35% annual fee for fiscal year 2027; FHA allows as little as 3.5% down for eligible borrowers and charges an upfront and an annual mortgage insurance premium. If the home and your income qualify for USDA, compare both on Loan Estimates.
| Feature | USDA guaranteed loan | FHA loan |
|---|---|---|
| Where you can buy | Eligible rural areas defined by USDA | Anywhere; 2026 one-unit limits run $541,287 to $1,249,125 by county |
| Income limit | Household income up to 115% of area median | No FHA income limit |
| Down payment | None (100% financing) | As little as 3.5% down for eligible borrowers with a 580+ score |
| Credit score | No USDA program minimum; lenders set their own | 580+ for maximum financing; 500-579 limited to 90% LTV |
| Upfront fee | 1.00% guarantee fee (FY 2027); the lender may pass it on to you | 1.75% upfront MIP, usually financed |
| Annual fee | 0.35% (FY 2027), for the life of the loan | 0.50% or 0.55% for most loans; 11 years or the loan term |
| Occupancy | Primary residence | Primary residence; move in within 60 days |
The U.S. Department of Agriculture's Single Family Housing Guaranteed Loan Program backs loans made by approved private lenders. USDA says eligible applicants may buy, build, or improve a home in an eligible rural area with 100% financing. To qualify, applicants must:
USDA's program page states that the program has no credit score requirements; lenders still review your credit and can set their own minimums. You can check an address and household income on USDA's eligibility site.
FHA, part of HUD, insures loans made by FHA-approved lenders. According to the CFPB, the standards for qualifying are generally more flexible than for conventional loans. Under HUD Handbook 4000.1, a minimum decision credit score of 580 or higher is eligible for maximum financing (96.5% loan-to-value on a purchase, which is why you hear "as little as 3.5% down for eligible borrowers"). Scores from 500 to 579 are limited to 90% LTV. FHA has no income cap and no rural-area rule, but loan amounts are limited by county.
USDA charges two fees, which the lender pays and may pass on to you. For fiscal year 2027 (October 1, 2026 through September 30, 2027), USDA set an upfront guarantee fee of 1.00% and an annual fee of 0.35% for purchase and refinance loans. Federal rules cap the upfront fee at 3.5% and say the annual fee applies for the life of the loan. The CFPB describes these as an upfront fee plus ongoing mortgage insurance premiums paid to USDA.
FHA charges an upfront MIP of 1.75% of the base loan amount plus an annual MIP. Under HUD Mortgagee Letter 2023-05, for most loans with terms longer than 15 years and base loan amounts up to $726,200, the annual premium is 0.50% at 95% LTV or lower and 0.55% above 95%. Annual MIP lasts 11 years if your starting LTV is 90% or less; otherwise it lasts for the mortgage term.
What this means
On the same home, USDA's fee rates are lower than FHA's premium rates, but USDA only fits if the address is in an eligible area and your household income is under the limit. Compare the full Loan Estimates, including the interest rate, to see the real difference.
A USDA loan is often worth a close look if:
An FHA loan is often worth a close look if:
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No. USDA says eligible applicants can buy a home in an eligible rural area with 100% financing. You still need to cover closing costs or arrange for them to be paid, and you must qualify with the lender.
USDA's eligibility site lets you check a property address and your household income. The home must be in an eligible rural area as defined by USDA.
For the guaranteed program, household income cannot exceed 115% of the median household income for the area. The exact limit depends on the county and household size.
For fiscal year 2027 (October 1, 2026 through September 30, 2027), USDA set an upfront guarantee fee of 1.00% and an annual fee of 0.35% for purchase and refinance loans. Federal rules say the annual fee applies for the life of the loan.
If your starting loan-to-value is 90% or less, annual FHA MIP lasts 11 years. Above 90%, it lasts for the mortgage term.
USDA's program page says the program has no credit score requirements, though lenders can set their own. Under HUD Handbook 4000.1, FHA allows maximum financing at 580 or higher and limits scores from 500 to 579 to 90% loan-to-value.
This page is general education, not a loan offer, commitment, or approval. Program rules and figures change; the figures here were checked against the sources below in October 2026. Your options depend on your credit, income, property, and each lender's guidelines. All loans are subject to approval.
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