How to Get a USDA Home Loan: 6 Steps

Getting a USDA Loan Can Make Homeownership More Affordable

Mortgages through the U.S. Department of Agriculture (USDA) can make homeownership more affordable for eligible buyers in suburban and rural areas. But how does getting a USDA home loan work?

Let’s dive into how to get a USDA loan for a home, including what the process looks like, timelines you might expect, and how Freedom Mortgage can help you along the way.

Understanding USDA Loan Types

If you meet the USDA’s eligibility requirements, there are a few types of mortgage loan options to choose from. Here are two of them:

• USDA guaranteed loans are the most common USDA loan program. These loans are meant to support low-to-moderate-income buyers. USDA-approved lenders like Freedom Mortgage issue these loans with USDA backing.
• USDA direct loans are for homebuyers with low and very low incomes and are issued directly by the USDA. You apply directly through the USDA instead of a bank or mortgage company. The process can be longer and is usually more restrictive.

If you’re buying a home and meet USDA eligibility requirements, the guaranteed loan could be a good fit. The process for getting a USDA guaranteed loan is the one we’ll discuss next.

Step 1: Get Prequalified Through a USDA-Approved Lender

Not every lender offers USDA loans, but Freedom Mortgage does, and getting prequalified can help you estimate how much house you can afford. Prequalification involves submitting some basic information about you and any co-borrowers, such as income statements, W-2s or tax returns, bank statements, and a valid photo ID. You’ll also need to consent to a credit check.

Keep in mind that prequalification isn’t the same as preapproval. You’ll need to go through the formal application process to get a USDA loan.

Once your lender ensures you meet USDA income requirements and credit score requirements, and that you have an acceptable debt-to-income ratio (DTI), you can start looking for eligible USDA properties.

Step 2: Find an Eligible Property

Your home search will need to focus on properties that meet USDA standards, including:

• Location: The area where the property is located must be rural or suburban, based on the population. These designations are set by the USDA and are regularly re-evaluated.
• Property type: Eligible properties include single-family homes, some condos, and some manufactured homes.
• Condition: The property must be safe, structurally sound, and sanitary.

You can use the USDA eligibility map to determine if the property you’re interested in is located in a rural or eligible suburban area.

Step 3: Make an Offer and Sign the Purchase Agreement

Next, you’ll make an offer on the property you’ve selected. Your real estate agent can help you make a competitive but affordable offer and navigate any seller concessions and contract negotiations.

After your offer is accepted, you’ll need to sign a purchase agreement, which details the terms and conditions of the sale.

Step 4: Get a Home Appraisal

Your lender will use the purchase agreement to order a USDA-required home appraisal. If the appraisal finds any glaring issues, especially any safety hazards, they’ll likely need to be addressed before the loan can move forward. Examples of potential safety hazards include mold, faulty wiring, significant foundation cracks, and roof damage.

Step 5: Complete Your Loan Application

After the appraisal and any concerns are addressed, your lender will begin the underwriting process. Your financial information will likely be reviewed again, and so will the property, to double-check that it meets USDA standards.

Step 6: Wait for USDA Approval and Close on the Loan

Once underwriting is complete, your lender will submit your application to the USDA for final approval. This step is unique to the USDA loan process—FHA loans, for example, don’t require final approval from the Federal Housing Administration.

The USDA reviews your financial eligibility, the property’s appraised value and condition, and general compliance with USDA program guidelines. This review can take a few weeks, depending on your state’s USDA office and current workload.

After the USDA grants approval, your loan is considered clear to close. At closing, you’ll sign the loan documents, pay any upfront closing costs, and get the keys to your new home.

How Long Does the USDA Loan Process Take?

The process for getting a USDA loan can take 30–60 days or more, in some cases. Timelines can vary greatly by state, but are usually longer than the typical timeline for getting a conventional loan.

Here’s a breakdown of what your timeline to get a USDA loan could be:

Getting a USDA Home Loan FAQs

Here are answers to some questions you may have about the USDA home loan process.

How Hard Is It to Get a USDA Home Loan?

As long as you meet USDA requirements for household income, credit, and property location, type, and condition, getting a USDA loan can sometimes be easier than getting other types of mortgages.

Can You Apply for a USDA Home Loan Online?

Yes, you can usually start the process of getting a USDA home loan by getting prequalified or preapproved online with USDA-approved lenders. At Freedom Mortgage, we can also help guide you through our secure online loan application.

What’s the Difference Between Getting a USDA Direct vs. a USDA Guaranteed Loan?

With a USDA guaranteed loan, you apply through an approved private lender that handles most of the process. USDA direct loans, on the other hand, require you to apply through the USDA, and the loan process is handled entirely by the USDA.

Summary: How to Get a USDA Home Loan

Getting a USDA home loan may involve a few extra steps, but the benefits—such as the strong possibility of no down payment and a low interest rate—can make the process worth it.

At Freedom Mortgage, we’re here to walk you through every step, from prequalification to closing. Interested in seeing if you qualify for a USDA loan? Start the prequalification process today.