Loan comparison

FHA vs USDA Loan

Side-by-side breakdown of FHA Loans and USDA Rural Development Loans — credit, down payment, mortgage insurance, and who each one fits.

See which one you qualify for →Run affordability

At a glance

Feature	FHA	USDA
Minimum credit score	580+	640+
Minimum down payment	3.5%	0%
Mortgage insurance	MIP for the life of the loan (0.55% annual on most 30-year loans, plus 1.75% upfront)	annual fee of 0.35% + 1% upfront guarantee fee (much cheaper than FHA MIP)
Loan limit (2026, standard county)	$524,225	No hard cap
Best for	buyers with credit scores 580–680 or limited down payment savings	buyers in USDA-eligible rural and suburban areas with moderate income
Property types	Primary residence only	Primary residence only

FHA Loan

FHA loans are insured by the Federal Housing Administration and originated by approved lenders. They exist to make homeownership reachable for borrowers who don't fit conventional guidelines — lower credit scores, higher DTIs, or thin down payments.

580+ FICO for 3.5% down; 500–579 for 10% down
43% DTI standard, up to 56.9% with compensating factors
Primary residence only (no investment properties)
Property must meet FHA minimum property standards
2-year employment history in the same field

USDA Rural Development Loan

USDA loans are backed by the U.S. Department of Agriculture and require zero down payment. They're geographically restricted — the property must sit in a USDA-eligible area — and income-capped at 115% of the area median.

640+ FICO for streamlined underwriting
Household income at or below 115% of area median (AMI)
Property in a USDA-designated rural or suburban area
Primary residence only
U.S. citizen, permanent resident, or qualified alien

When to choose FHA over USDA

Choose FHA when you're buyers with credit scores 580–680 or limited down payment savings. Choose USDA when you're buyers in USDA-eligible rural and suburban areas with moderate income. The scorecard shows exactly which programs price best for your credit, DTI, and down payment in about 90 seconds.

Frequently asked questions

Is a FHA or USDA loan better?

Neither is universally better — it depends on your profile. FHA Loans are buyers with credit scores 580–680 or limited down payment savings. USDA Rural Development Loans are buyers in USDA-eligible rural and suburban areas with moderate income. Run your numbers in the ReadinessIQ scorecard to see which one you actually qualify for at the best pricing.

Can I switch from a FHA loan to a USDA loan later?

Yes — refinancing from FHA to USDA (or vice versa) is common once you build equity or improve credit. Many borrowers start on FHA and refinance to USDA to drop mortgage insurance.

Which has lower monthly payments, FHA or USDA?

Base P&I depends on rate, not program. The difference shows up in mortgage insurance: MIP for the life of the loan (0.55% annual on most 30-year loans, plus 1.75% upfront); annual fee of 0.35% + 1% upfront guarantee fee (much cheaper than FHA MIP). Over a 30-year loan that gap can total tens of thousands.

What credit score do I need for FHA vs USDA?

FHA Loan: 580+. USDA Rural Development Loan: 640+. Lenders often add overlays above these floors — most originators want 620+ for FHA and 640+ for USDA in practice.