A USDA home loan is a special type of mortgage backed by the US Department of Agriculture. These mortgages are part of the USDA's Rural Development Guaranteed Housing Loan Program. With great interest rates and no down payment necessary, USDA loans make homeownership more affordable to people in rural areas who might not qualify for conventional mortgage loans.

Unlike most conventional mortgage loans, USDA home loans don't require a down payment. They do require mortgage insurance, but it differs from private mortgage insurance, or PMI, because it's capped at 1% of your loan amount and can be rolled into your loan. There's also an annual premium that's divided by 12 and added to your monthly payment.

To qualify for a USDA home loan, the house you're purchasing must be in an eligible rural area and your income needs to be below the eligibility cap for that area. Lenders will also consider your debt-to-income ratio, or DTI, and your credit score. Preferred borrowers will typically have a DTI under 43% and a credit score of 640 or above.

No. Homes purchased with USDA loans must be your primary residence, not a vacation or investment property. However, this doesn't mean you have to be a first-time homebuyer. Repeat buyers can also qualify for this unique mortgage program.