Best USDA mortgage lenders of October 2024 #CashNews.co

Urban living is not for everyone. If you would rather wake up in your home with a view of trees rather than traffic, then a USDA loan might help make that happen.

Yahoo Finance has researched leading USDA lenders and narrowed the list to the best of the best.

Dig deeper: Everything you need to know about first-time home buyer programs

The best USDA lenders of October 2024

Best USDA lender overall

U.S. Bank

The Yahoo view: U.S. Bank stands tall as the largest full-service national bank by USDA mortgage lending volume.

Stars: 3.80

Read our full U.S. Bank mortgage review

Key benefits

• As a full-service national bank, you can begin a financial relationship with a USDA mortgage loan and tap other U.S. Bank services as your needs grow.

• Has pledged to offer $100 million over five years in down payment assistance and lender fee credits to underserved families.

• You can make an application online, by phone, or with a loan officer at a branch location.

Need to know

• Advertised mortgage rates have a stiff down payment and above-average FICO score requirements.

• Branch offices are listed in 42 states. If you live in Alabama, Alaska, Hawaii, Louisiana, Mississippi, New Hampshire, Oklahoma, or Vermont, you’ll need to apply by phone or online.

Learn more: Are mortgage rates going down in 2024 and 2025?

Best USDA lender for mortgage rate transparency

Flagstar

The Yahoo view: Shopping for the best mortgage rate is hard enough. Flagstar sets a high bar with an excellent home loan interest rate tool.

Stars: 3.50

Read our full Flagstar Bank mortgage review

Key benefits

• A mortgage rate tool allows you to enter your credit score and any discount points you wish to purchase. That provides you with an interest rate estimate that is much more accurate than typical advertised rates.

• Flagstar offers assistance with closing costs of up to $15,000 for eligible first-time home buyers in specific areas.

• If you don’t have a Social Security number, Flagstar may qualify you for an ITIN mortgage with your Individual Tax Identification Number (ITIN) instead.

Need to know

Best lender for USDA refinancing

CMG Financial

The Yahoo view: An impressive library of learning resources for first-time buyers sets CMG apart. A unique gift tool also helps fund closing costs and the down payment.

Stars: 3.40

Read our full CMG Financial mortgage review

Key benefits

• CMG Financial offers a downloadable refinance guide that shows you how to lower your monthly payment, change loan programs, or access your home equity.

• CMG has mastered the art of simplifying the loan process. Click on “USDA,” and you’ll get step-by-step info on loan eligibility, credit score requirements, and all the details on how to qualify and apply for a USDA loan.

• The HomeFundIt program is a gift tool that works through your social network, allowing family and friends to contribute to your home purchase savings.

Need to know

Best USDA lender for borrowers with low credit scores

Cardinal Financial

The Yahoo view: Cardinal Financial earns a spot on our best USDA lenders list because of its willingness to accommodate borrowers with low credit scores.

Stars: 3.20

Read our full Cardinal Financial mortgage review

Key benefits

• Cardinal Financial may accept a credit score as low as 580 on a USDA loan.

• Cardinal is one lender happy to highlight USDA loans. A slick video details the benefits of these loans — and might actually fuel your fire to move out of the city.

Need to know

Best USDA lender for customer satisfaction

Fairway Independent Mortgage Corporation

The Yahoo view: Fairway Independent Mortgage Corporation earned the highest customer satisfaction score in the 2023 J.D. Power mortgage lender survey.

Stars: 3.00

Read our full Fairway Independent Mortgage Corporation review

Key benefits

• Fairway offers a detailed resource on how a USDA loan can be used to finance a home renovation. It includes a lot of information we haven’t seen other lenders offer.

• For those who appreciate a face-to-face service option, Fairway has locations in 48 states and Washington, D.C. While there are no offices in Alaska and West Virginia, they are licensed to offer loans in the two states.

Need to know

How do USDA loans work?

USDA loans are guaranteed by the U.S. Department of Agriculture to enhance the livability and homeownership of rural America. The mortgages can be used to purchase, refinance, or renovate houses in eligible areas. It must also be your primary residence.

The major benefits of a USDA loan are relaxed credit qualifying standards and a lower minimum credit score, with no down payment requirement. A moderate income limit applies.

Many USDA home loans, like the ones we have listed above, are issued by private lenders. However, USDA Single Family Direct Loans are issued to low- and very-low-income borrowers from a USDA Rural Development office located in each state.

Read more: What are government home loans?

USDA mortgage insurance

Low-down-payment mortgages often require mortgage insurance. It protects lenders in the event of borrower defaults. The USDA mortgage insurance is called a guarantee fee. There is a 1% fee on your total loan charged at closing and an ongoing annual charge of 0.35%.

As you pay down your loan, you can always refinance into a loan without mortgage insurance. You’ll use your equity as a down payment on a new mortgage and refi out of the fees.

Read more: USDA mortgage insurance — What it covers and how much you’ll pay

Types of USDA loans

Single Family Housing Guaranteed

These are no-money-down USDA loans issued by private lenders to moderate-income borrowers. Underwriters at approved USDA mortgage providers structure the loan terms to the agency’s standards for houses in eligible areas.

Single Family Housing Direct

You apply for a Direct loan at a USDA Rural Development office in your state. It’s a no-down-payment mortgage designed to assist the most financially vulnerable households in achieving home ownership in rural areas. These loans come with below-market mortgage rates.

USDA purchase and rehab loans

This loan is for the fixer-uppers out there. You want to buy a house and do some repairs and upgrades. The USDA purchase/rehab loan finances that. You get the money to fix the place up and buy it all with one mortgage and closing process. There’s no down payment and the loan is based on the home’s value with improvements.

USDA construction-to-permanent loans

A USDA single-closing construction loan lets you buy the land, build a home, and sign a mortgage in one transaction. It provides peace of mind to the builder and less hassle for you. As with all USDA loans, this program is designed for low-to-moderate-income borrowers in rural areas.

USDA standard streamlined refinance loans

The “standard” version of a streamlined USDA refinance is a good option for homeowners with decent credit scores looking for a lower payment or interest rate. You will provide an income and credit score update to qualify.

USDA streamlined assist refinance loans

If you already have a USDA loan and are still working to improve your credit, the USDA Streamlined Assist Refinance loan may be the solution. A new appraisal is not usually required, nor is a new credit review or home inspection. The loan must enable the borrower to save at least $50 monthly.

Read more: A guide to USDA streamlined refinance loans

Tips for comparing USDA lenders

Finding the right USDA-approved lender for you is a matter of shopping around. You want lenders to compete for your business so that you can compare loan fees and interest rates side by side.

First, use a mortgage calculator to run some numbers on possible monthly mortgage payments. Make sure you’re comfortable with the results.

Check your free credit history for any errors that need to be cleared up. Then, pull your own credit score. You will need at least a 580 FICO score to qualify for a USDA loan, though some lenders may look for a higher score. That’s another good reason to shop multiple mortgage providers.

Remember to compare the annual percentage rate (APR) each lender offers. That’s your interest rate, including all fees. You will receive a three-page Loan Estimate from each lender. Have a loan officer explain the first one to you, then compare the others you receive from competitors.

Alternatives to USDA loans

Consider various mortgage loan types to find out which works best for you. While USDA loans are appealing, you may discover another option that suits you even better.

USDA vs. conventional loans

USDA loans are a go-to loan solution for borrowers with credit scores under 600. However, if your credit score is 620 or higher, you might be able to qualify for a conventional loan.

HomeReady and Home Possible are conventional loans offering down payments as low as 3%. That’s slightly better than the FHA minimum down payment of 3.5%. A few lenders allow 1% down payments on the same conventional loan programs. See Yahoo Finance’s best lenders for first-time homebuyers to find lenders with 1% down offers.

Read more: USDA loans vs. conventional loans

USDA vs. VA loans

USDA-guaranteed loans are perfect for buyers looking to live in rural areas. However, if you are an active or retired servicemember, a VA loan may be an even better choice. Backed by the Department of Veterans Affairs, VA loans usually require no down payment or mortgage insurance and put a limit on closing costs.

Learn more: USDA loans vs. VA loans

USDA vs. FHA loans

FHA loans are another alternative to explore. While USDA loans are designed to serve low- to moderate-income households earning no more than 115% of the local median household income, FHA loans are capped by county loan limits.

One big distinction: USDA loans often require no down payment. FHA mortgages require at least 3.5% down.

Read more: USDA loans vs. FHA loans

Yahoo Finance mortgage lender methodology

Yahoo Finance identified the best mortgage lenders by analyzing and grading leading national lenders, which were compiled from 2023 Home Mortgage Disclosure Act data. The lenders were then scored on a quintile scale for five criteria: the median interest rate offered to borrowers, rate transparency, median fees and loan costs, affordability factors including loan offerings and down payment assistance, and online educational resources and calculators featured on lender websites.

A review of the Nationwide Multistate Licensing System’s data on regulatory actions enabled a penalty to the score of any lender with a mortgage-related administrative or enforcement action within the past five years.

Advertisers or sponsorships do not influence ratings.

Lenders that did not make our USDA lender list

We considered the following mortgage lenders for our USDA best lender list, but they weren’t quite as strong as our top picks — and a few don’t offer USDA loans at all:

Best USDA mortgage lender FAQs

Is it better to use a mortgage lender or a bank for a USDA loan?

It’s best to keep an open mind when shopping for a USDA mortgage lender. That’s because banks often want to broaden their relationship with customers by offering a discount or fee concession on a mortgage. Credit unions have the same incentive to cater to existing members. And mortgage companies have the expertise to compete on interest rates and closing costs. By shopping different types of lenders, you get the advantage of having them compete to win your business.

Who is the No. 1 USDA mortgage lender in America?

According to 2023 Home Mortgage Disclosure Act data, CMG Mortgage is the No. 1 USDA-approved lender by loan volume. Yahoo Finance also considers it one of the best USDA lenders.

What is the meaning of USDA loan?

USDA loans are backed by the U.S. Department of Agriculture, hence USDA. You don’t have to be a farmer, rancher, or in any type of agricultural business to get a USDA loan. But you do need to buy, build, or renovate a property in an eligible rural area.

Is a USDA loan the same as an FHA loan?

No. While both programs target borrowers of modest means, there are several differences between the two. USDA mortgages often require no down payment; FHA looks for at least 3.5% down. USDA loans have household income limitations; FHA loans have property value parameters. USDA loans are available in specific rural or suburban areas; FHA loans have no location restriction. It’s best to consider all loan options and choose the one best for your circumstances.

What is the most you can borrow with a USDA loan?

The USDA loan borrowing limit depends on where you live, but in many counties, the limit is $398,600 in 2024. Find the limit for your county on the USDA Area Loan Limits page.

What is a good credit score for a USDA loan?

The U.S. Department of Agriculture doesn’t set a minimum credit score for USDA loans — credit requirements vary by mortgage lender. Many lenders want to see a minimum score of 620.

This article was edited by Laura Grace Tarpley.