Learn the key differences between VA and USDA loans, including requirements and eligibility. Get expert insights to make an informed decision.
- Introduction
The advantage of having multiple government home loan options is that you can select the one that best suits your needs in terms of terms, costs, and mortgage lenders. There are several options available to active duty members and veterans who wish to purchase a home in a rural area. They might be eligible for USDA loans in addition to VA loans. To help you choose between a USDA loan and a VA loan, we’ll compare the eligibility requirements and expenses of both government mortgage programs in this guide.
- Break it Down: What USDA Loans and VA Loans Truly Are?
Like traditional loans, these programs offer money and mortgages through private lenders and brokers. If you qualify, the USDA and VA loan programs serve as insurance programs that support your financing by guaranteeing your mortgage with the lender.
The following breakdown demonstrates the true significance of these loans:
- USDA Loans
USDA loans help low-income homeowners by providing flexible credit requirements and reduced interest rates.
In USDA-approved rural or suburban areas, eligibility is restricted to 115% of the local median income. Both an upfront guarantee fee and an annual fee are paid by borrowers.
| Did you know? In 2025, the annual fee for a USDA loan is 0.35%, and the upfront fee is 1% of the loan amount. |
- VA Loans
Active military personnel, veterans, and some surviving spouses can benefit from VA loans by using the VA loans calculator, which is guaranteed by the Department of Veterans Affairs and has lenient lender requirements and lower interest rates.
| Did you know? In 2025, the upfront VA funding fee may range from 1.25 to 3.3%. |
- What Sets Them Apart: USDA Loans vs VA Loans
It can be difficult to decide between a VA and a USDA loan. There are some similarities between USDA and VA loan requirements, but there are also some significant differences.
The key considerations when contrasting USDA and VA loans are listed in the table below.
- Eligibility
The eligibility requirements for USDA and VA loans are different. USDA loans are intended for people with moderate to low incomes; they require qualified rural or suburban homes and good credit. Veterans, active duty military personnel, and surviving spouses are eligible for VA loans.
| Protip: If you are eligible for both USDA and VA loans, compare loan rates to find the best deal. |
- Credit Score Minimum
Homeownership is more accessible thanks to USDA and VA loans, which offer credit score flexibility without a minimum. While VA lenders strive for a credit score of 620 or above, USDA loans require a score of 640.
- Income Limit
The income limits for VA and USDA loans differ. VA loan rates are available to low- to moderate-income homebuyers because they are based on military service history rather than income, whereas USDA loans have specific limits based on household size and property location.
- Interest Rate
Government-backed loans like VA and USDA have better interest rates. Throughout the mortgage, VA loan rates were.251% lower than USDA rates in 2024, saving thousands of dollars in interest.
| Takeaway: VA interest rates were marginally lower than USDA rates in the previous year. |
- Loan Limit
Whereas VA loans have no limits, first-time borrowers may still be subject to them; USDA loans have limits based on household size, location, and income.
- Property Requirements
While VA loans are more lenient, they still require structural soundness, safety, and hygienic conditions. USDA loans, on the other hand, offer rural and suburban homes, subject to certain requirements and appraisals.
| Protip: Appraisals are necessary for both USDA and VA loans. |
- Program Fees
VA loans have a one-time funding fee, whereas USDA loans have an upfront guarantee fee and an annual fee. VA loans cost $204,600 in total, while USDA loans cost $202,000 plus an additional $700 per year.
- Closing Cost
Closing costs for USDA loans range from 2% to 6%, and USDA seller concessions, which allow up to 6% of the loan amount, are more advantageous for those with limited funds.
- Conclusion
In conclusion, there are clear benefits and drawbacks to both VA loans and USDA loans. For eligible veterans, VA loans, which are backed by the US Department of Veterans Affairs, offer advantages like lower interest rates, no down payment requirements, and private mortgage insurance. In highly competitive markets, conventional loans also referred to as USD loans may be simpler to secure and offer greater flexibility in terms of loan limits and property types. The ideal choice is determined by each person’s priorities and situation.
FAQs
Is visiting a bank or a mortgage broker preferable?
Going straight to your bank could be a wise choice if you appreciate convenience and have a positive working relationship with them.
What are the USDA loan requirements?
USDA loan eligibility requires U.S. citizenship, repayment ability, a 620 credit score, a 620 income limit, USDA-approved rural property, and primary residence in a USDA-approved area.
What is the USDA loan minimum credit score?
Although there is no minimum credit score required for USDA loans, lenders usually favor applicants with a FICO® credit score of at least 620.
How much is the maximum VA loan amount?
VA loan limits are the highest amount that VA guarantees, not the highest amount that a lender is permitted to lend to fully entitled eligible veterans.
What is the sole qualifying ratio for VA loans?
The debt-to-income ratio, or the proportion of monthly income devoted to debt, must be 41% to qualify for VA loan requirements. For accurate results, search now for VA loans near me and get instant quotes.