USDA Loan Application & Process
The USDA loan program helps lower-income borrowers buy homes in rural and suburban communities across America.
These loans feature competitive interest rates and low mortgage insurance costs and allow qualified buyers to purchase with a $0 down payment.
To apply for a USDA loan online, simply get started here → Start My Application
How to Apply for a USDA Loan Step-by-Step
There are two different USDA loans you can apply for: USDA guaranteed or USDA direct.
Only the USDA offers USDA direct loans and you can apply for at your local branch office. While USDA direct offers very low interest rates, these loans are limited in availability and are only for very low- to low-income borrowers.
Private lenders – like Neighbors Bank – offer USDA guaranteed loans, and the USDA insures them.
Here is how the process works when applying for a USDA loan with a private lender:
- Prequalify with a USDA-approved lender
- Get pre-approved
- Find a USDA-eligible home
- Sign a purchase agreement
- Get underwriting approval
- Get final USDA loan approval (known as “the clear-to-close”)
- Sign and close on your new home!
Tips To Strengthen Your USDA Loan Application
Here are some tips to strengthen your USDA loan application and help ensure the process goes smoothly:
Tip #1: Decide Between a USDA Direct or USDA Guaranteed Loan
You’ll want to decide between a USDA direct or USDA guaranteed loan early on in the application process, because each program has different eligibility requirements, benefits, and application steps.
USDA direct loans are designed for low- and very low-income applicants and issued directly by the USDA, which means the process will likely take longer and require more documentation.
USDA guaranteed loans, on the other hand, are available through approved lenders and are aimed at moderate-income borrowers. They often allow for a faster and more flexible loan experience. They also don’t have as restrictive income requirements.
Knowing which path you qualify for — and which fits your financial situation — can help you avoid delays, streamline your paperwork, and set realistic expectations from the start. However, you can always get pre-approved for a USDA guaranteed loan through a private lender if your USDA direct loan doesn’t work out.
Tip #2: Make Sure the Property Area is Eligible
USDA loans have restrictions on where you can buy a home. While this USDA program aims to expand homeownership in “rural” areas, their definition of rural isn’t as restrictive as one might think. In fact, you can find USDA-eligible homes outside of most major cities.
You can use this free map tool to check if a home is USDA-eligible.
Shopping with a real estate agent can also help speed up your search for an eligible property. A dedicated agent will prioritize your needs and negotiate on your behalf. If they are familiar with the USDA process, they can also show you only homes that will likely meet USDA’s minimum property standards.
Tip #3: Check Your Income Eligibility
Unlike other government-backed loans, USDA loans have income limits that restrict how much your household members can make. To meet USDA income requirements in 2025, the standard limit for households of 1 to 4 is $112,450. For households of 5 to 8, the standard limit is $148,450. Income limits vary to account for especially high-priced areas, so make sure to use our income tool to verify the specific address.
Tip #4: Check if You Meet Other USDA Requirements
Generally, to qualify for a USDA loan, you’ll need to meet these criteria:
- Property must be your primary residence
- Household income meets county USDA income limits
- Must be a U.S. citizen, U.S. non-citizen, or qualified alien
- Property must be in a USDA-eligible location
- Minimum 620 FICO credit score
- Identify and clear any red flags or derogatory credit history that may complicate or delay your purchase
✅ Neighbors Bank’s minimum credit score is currently 620.
Neighborly AdviceUSDA’s automatic underwriting system GUS typically requires a minimum credit score of 640 for automatic approval. If your credit score is below 640, your lender will need to manually underwrite your loan before submitting it for USDA approval. The application process may require a little more documentation, and take a little extra time and patience.
Dan Bartelt, Underwriter
Tip #5: Get Preapproved with a USDA Lender
Getting pre-approved is a key step for buyers. USDA loan preapproval gives you a solid look at what you can afford and shows home sellers you’ve got what it takes to make good on an offer.
Finding a USDA-approved lender is a solid first step to getting one. Not every lender is, but you can find approved lenders near you using the USDA’s tool.
Preapproval puts you in a position to make an offer once you find an eligible property. Lenders request income documentation to confirm your income and USDA eligibility before they will issue a preapproval.
After you’ve found a home and signed a purchase agreement, the USDA loan application process typically takes around 30-45 days. The faster all parties work together to complete and provide documents for loan approval, the quicker final loan approval and closing can happen.
Keep in mind: pre-approvals are not guaranteed loan approvals. You must satisfy all credit and income conditions from underwriting. The property also must pass a USDA appraisal before final loan approval can be issued.
Final Approval and Closing Process
USDA’s final approval of your loan is also known as the official “clear-to-close!”
You can typically expect closing to happen within a few days after final USDA loan approval. Your agent (if you worked with one) and your lender will work with the seller and title company to coordinate and schedule closing.
The best approach to getting a home loan is to go with the flow. The quicker you work with your lender through your application, the smoother and quicker your closing will go.
