The USDA mortgage program and FHA are both government-backed mortgage loans designed for low-to-moderate income home buyers. Both loans offer a number of benefits including lower down payments, lower closing costs, and lower mortgage rates. However, the eligibility requirements and loan limits are different for each loan program.
USDA Loan: The USDA Rural Housing Service loan program focuses on rural and suburban communities. Most properties must fall within a USDA-defined rural area and the buyer must meet specific income, credit, and property requirements to qualify.
FHA Loan: The FHA loan program was designed to offer low down payment options to first-time home buyers and others with low incomes. A borrower with an FHA loan typically has a down payment as low as 3.5% of the purchase price.
USDA Loan: Purchase Price Limits: The USDA loan program applies to homes priced up to $424,100 in most rural areas (or up to $636,150 in high-cost areas). If your home costs more than these limits, you may not be able to use the FHA loan program.
FHA Loan: Purchase Price Limits: The FHA loan program applies to homes priced up to $636,150 in most areas. However, in high cost areas, the maximum purchase price limit is $726,525.
USDA Loan: Loan Limits: The USDA loan program offers two types of loan limits: Guaranteed Loan Limits and Direct Loan Limits. Guaranteed Loan Limits apply to most rural areas, while Direct Loan Limits apply to rural counties where there are no USDA lenders.
FHA Loan: Loan Limits: The FHA loan limits for home purchases vary by state and county. In a standard FHA loan program, you can get a loan up to $271,050 in most rural areas and up to $636,150 in high-cost counties.
USDA Loan: FHA Qualifying Credit Score: The USDA program offers loans for home buyers with credit scores as low as 580. FHA requires a credit score of at least 500 to qualify for an FHA loan, but you may be able to get approved with a score as low as 500 if you make a down payment of at least 10% of your home’s purchase price.