Dan Green

Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. .

Similar Homes - Fha Vs Usda

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FHA Mortgage vs USDA Mortgage: Compare Side by Side

This home buyer guide to FHA vs USDA mortgages compares two popular low-down-payment mortgage loans. Use the comparison to help decide which mortgage is best for your upcoming purchase of a home.

The Differences Between FHA and USDA Mortgages

The FHA and USDA mortgage programs are similar in some ways. They are government-backed mortgages for primary residences only, and each has an official name that’s rarely used – the FHA 203(b) and the Section 502. Furthermore, both loans were created make homes more affordable for Americans who want to buy them.

The similarities between FHA and USDA mortgages end there.

Highlights: FHA Mortgage

The FHA mortgage program is a versatile and inclusive home loan for U.S. home buyers. FHA mortgages can be used for 1-unit and multi-unit properties; for homes in need of renovation and repair; and by buyers with low credit scores.

Key FHA loan features include:

  • Minimum 3.5 percent down payment requirement
  • Available to first-time and repeat home buyers
  • No income limitations or thresholds
  • 580 credit score minimum with flexibility to a 500 credit score
  • Available for 1-4 unit homes, including condos and townhomes

Mortgage underwriting is more lenient for FHA loans than USDA mortgages, especially for home buyers with a history of bankruptcy or foreclosure.

Highlights: USDA Mortgage

The USDA mortgage program is an optional no-down payment mortgage for home buyers in suburban and rural parts of the country. USDA mortgages come with low mortgage rates and mortgage insurance costs, and are generally more affordable than other loan types.

Key USDA loan features include:

  • No down payment required
  • Available to first-time and repeat home buyers
  • Income limitations based on county
  • Minimum credit score requirement of 620
  • Available for 1-unit properties only including manufactured and modular homes

USDA mortgage guidelines allow home buyers to add mortgage and real estate closing costs to their principal balance to borrow over 100% loan-to-value.

Mortgages At-A-Glance

Loan FeatureFHAUSDA Loan
Minimum Loan Size AllowedNoneNone
Maximum Loan Size AllowedSee Loan LimitsNone
Maximum Household Income AllowedNo Restrictions115% of AMI
Minimum Credit Score Required500None
Debt-to-Income Maximum - Standard43.00%41.00%
Debt-to-Income Maximum with Compensating Factors50.00%44.00%
Minimum Downpayment Required3.50%None
Maximum Loan-To-Value Allowed96.50%1
Maximum Combined Loan-to-Value Allowed1.251
First-Time Homebuyer Education RequiredNoNo
Minimum Age AllowedMinimum Legal AgeMinimum Legal Age
Maximum Age AllowedNoneNone
First-Time Home Buyers AllowedYesYes
First-Time Home Buyers OnlyNoNo
Low-Down Payment Mortgage ClassificationYesYes
Income Verification RequiredYesYes
Military Service RequiredNoNo
States AllowedAll StatesAll States
Homeowners Insurance RequiredYesYes
Escrow Taxes & Insurance RequiredYesYes

Compare Mortgage Statistics

Loan FeatureFHAUSDA Loan
Average Interest Rate: Last Year4.99%4.72%
Average Loan Size: Last Year$279,773182,777.09
Average Approval Rate: Last Year75.02%78.70%
Market Share: Last Year17.97%1.71%
Purchase Mortgages Originated: Last Year887,23484,322

Compare Mortgage Products

Loan FeatureFHAUSDA Loan
1-Year ARM AvailableYesNo
5-Year ARM AvailableYesNo
10-Year Fixed-Rate Mortgage AvailableYesYes
15-Year Fixed-Rate Mortgage AvailableYesYes
20-Year Fixed-Rate Mortgage AvailableYesYes
25-Year Fixed-Rate Mortgage AvailableYesYes
30-Year Fixed-Rate Mortgage AvailableYesYes
Temporary Buydowns AvailableRestrictedYes

Compare Mortgage Insurance

Loan FeatureFHAUSDA Loan
Funding Fee / Guarantee FeeNoYes
Upfront Mortgage Insurance PremiumYesYes
Annual Mortgage Insurance PremiumYesYes
Private Mortgage InsuranceNoNo

Compare Occupancy Rules

Loan FeatureFHAUSDA Loan
Primary ResidenceYesYes
Second HomeRestrictedNo
Vacation HomeNoNo
Investment PropertyNoNo
Non-Occupant Co-BorrowerYesNo

Compare Citizenship Rules

Loan FeatureFHAUSDA Loan
U.S. Citizen AllowedYesYes
Permanent Resident Alien AllowedYesYes
Non-Permanent Resident Alien AllowedYesYes
Foreign National AllowedYesNo
Buyers With Diplomatic Immunity AllowedYesNo

Compare Credit Rules

Loan FeatureFHAUSDA Loan
Credit Scoring ModelTri-mergeTri-merge
Non-Traditional Credit References AllowedYesYes
Deferred Student LoansActual Payment or 0.5% of Loan Balance5% of balance or payment on credit report if not zero
Deferred Debt CalculationLesser of 5% of balance or monthly paymentLesser of 5% of balance or monthly payment
Pay Off Medical Collections Prior To ClosingNot RequiredNo
Pay Off Non-Medical Collections Prior To ClosingRequired when collections exceed $2,000No
Bankruptcy, Chapter 72-Year Waiting Period3-year waiting period
Bankruptcy, Chapter 131-Year From Filing12-month waiting period
Short Sale3-Year Waiting Period3-year waiting period
Foreclosure3-Year Waiting Period3-year waiting period
Judgments & Liens AllowedMust be satifiedYes
Federal Income Tax Delinquency AllowedNoNo

Compare Property Rules

Loan FeatureFHAUSDA Loan
Minimum Square Footage AllowedNo minimum400 Sq. Ft.
Maximum Square Footage AllowedNo maximum2,000 Sq. Ft.
Single-Family Residences AllowedYesYes
Condominiums AllowedYesYes
Non-Warrantable Condominiums AllowedNoNo
Co-ops AllowedYesNo
Townhomes AllowedYesYes
2-4 Unit Homes AllowedYesNo
Manufactured Homes AllowedYesYes
Fraternity and Sorority Houses AllowedNoNo
Tiny Homes AllowedYesNo
Modular Homes AllowedYesYes
Cob Homes AllowedNoNo
Shipping Container Homes AllowedYesNo
Condotels AllowedNoNo
Bed & Breakfast AllowedNoNo
Working Farms AllowedNoNo
Working Ranches AllowedNoNo
Houseboats AllowedNoNo
Log Homes AllowedYesYes
Geodesic Homes AllowedNoNo
Timeshares AllowedNoNo
Homes with Solar Panels AllowedRestrictedYes
3-D Printed Homes AllowedNoYes
Leasehold Estates AllowedYesYes
Mixed-Use Properties AllowedYesNo
Flood Zones AllowedOnly where insurableYes
Properties With More Than 20 Acres AllowedYesNo
Properties with PACE AllowedNoYes

Compare Ownership Rules

Loan FeatureFHAUSDA Loan
Inter Vivos Revocable Trust AllowedYesNo
Closing in a Corporation AllowedYesNo
Community Land Trust AllowedYesYes
Non-Profit Organizations AllowedYesNo
Municipal Government Agencies AllowedYesNo

Compare Income Rules

Loan FeatureFHAUSDA Loan
W-2 Income AllowedYesYes
Self-Employment Income AllowedYesYes
Investment Income AllowedYesYes
Retirement Income AllowedYesYes
Trust Income AllowedYesYes
Social Security Income AllowedYesYes
Military Income AllowedYesYes
Rental Income AllowedRestrictedYes
Asset Depletion as Income AllowedNoYes
Offer Letter Income AllowedNoYes
Disability Income AllowedYesYes
Alimony and Child Support Income AllowedYesYes
Boarder Income AllowedRestrictedNo
Accessory Dwelling Unit Income AllowedYesYes
Cannabis Industry Income AllowedNoNo
Automobile Allowance as Income AllowedYesYes
Housing Allowance as Income AllowedYesYes
Temporary Leave Income AllowedRestrictedYes
Bank Statements as Income AllowedNoNo
Debts Paid By Others as Income AllowedNoNo

Compare Assets & Downpayment Rules

Loan FeatureFHAUSDA Loan
Seasoning Requirements30 Days60 days
Reserves RequiredNoNo
Cash Gift For Downpayment AllowedYesYes
Seller Concessions, Maximum6.00%6.00%
Salary Advance for Downpayment AllowedNoNo
Relocation Funds for Downpayment AllowedRestrictedYes
Gift of Equity AllowedYesYes
Sweat Equity AllowedYesNo
Crypto for Downpayment AllowedRestrictedNo
Cash Value For Credit Card Rewards AllowedNoNo
Cash Value For Airline Rewards AllowedNoNo

Compare Loan Traits

Loan FeatureFHAUSDA Loan
Assumable Mortgage AllowedYesYes
Trailing Co-Borrower AllowedYesYes
Maximum Properties Financed Allowed10.00%
Flipped Homes AllowedRestrictedNo
Arms-Length Transaction RequiredNoNo
Occupancy Deadline60 days60 days
Delayed Financing AllowedNoNo
Prepayment Penalty AllowedNoNo
Termite Inspection RequiredYesNo
Power of Attorney AllowedYesYes
Repair Allowances AllowedNoNo
Gifts From Charitable Organizations AllowedNoYes
Sources: FHA, U.S. Department of Agriculture

Important Notice For Home Buyers

This mortgage comparison between the FHA and USDA mortgages is based on current mortgage guidelines published by the FHA and the U.S. Department of Agriculture and is subject to change when mortgage guidelines change.

Mortgage lenders may apply lender overlays to the official mortgage guidelines, affecting mortgage underwriting and your ability to get approved.

If one lender turns down your FHA or USDA mortgage application, it does not mean that all mortgage lenders will turn down your application. Getting approved with another lender may be possible.

Consult with multiple lenders about your mortgage rates and choices.

Find Out More: FHA vs USDA Mortgages

Want to make an informed decision? Visit our comprehensive FHA mortgage and USDA mortgage guide pages. And when you’re ready to move forward, get your immediate mortgage approval at Homebuyer.com.


Citations

This article, "FHA Mortgage vs USDA Mortgage: Compare Side by Side" draws on the author's professional mortgage experiences and references information found at these authoritative websites:

       This home buyer guide to FHA vs USDA mortgages compares two popular low-down-payment mortgage loans side-by-side.

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