What's the difference between a VA loan and a USDA loan?

VA loans and USDA loans are both government-backed mortgages that allow borrowers to get a home with no down payment.

But they're aimed at different borrowers and have some very different eligibility requirements

Guaranteed by the Department of Veteran Affairs, VA loans are zero-down mortgages available to active service members, veterans and some surviving spouses.

Because they're backed by the government, they usually have lower interest rates than conventional mortgages and do not require private mortgage insurance. The VA doesn't set credit or income requirements, so lenders tend to have more flexible requirements, too.

Instead of mortgage insurance, there is a one-time funding fee that is dependent on how much of a down payment you make:

USDA loans are guaranteed by the U.S. Department of Agriculture and, like VA loans, do not require a down payment or private mortgage insurance. Interest rates on USDA loans are also typically lower than those for conventional loans and credit requirements are also more lenient.

Unlike VA loans, however, only borrowers who earn no more than 115% of the area median income are eligible for USDA loans. In addition, the loan can only be put toward a property in a specific USDA-approved rural or suburban area. (The USDA provides an eligibility map that indicates the eligible areas.)

The free structure for a USDA loan is also slightly different: Instead of private mortgage insurance, borrowers pay an upfront guarantee fee an annual fee.

In 2024, the upfront fee is 1% of the loan total and the annual fee is 0.35%.

While neither the Department of Agriculture nor the Veterans Administration have specific credit or income requirements, private lenders who offer these loans typically do.

Here are some of our top picks for VA loans, based on several factors

Best for customer service: Veterans United

The largest VA loan provider in the US, Veterans United has high customer satisfaction ratings from J.D. Power. If you need to boost your credit score before applying, Veterans United has free credit counseling services.

Best for low rates: Navy Federal Credit Union

Navy Federal Credit Union's rates for VA loans are well below the industry average. It also offers a Military Choice loan, which lets sellers contribute up to 6% of the home value toward closing costs. The No-Refi Rate Drop lets borrowers their rate without refinancing for a flat $250 fee.

Best for in-person experience: Chase Bank

Chase has the largest bank network in the U.S., with more than 4,000 branches in 48 states and mortgage advisors in 38 states. VA loans are eligible for a $2,000 closing credit and Chase guarantees on-time closing in as little as 21 days or eligible homebuyers may get a $5,000 rebate.

Here are some of our top choices for USDA loans in a variety of categories.

Best for bad credit: Guild Mortgage

Guild Mortgage approves USDA loan applicants with a credit score of as low as 540, much lower than the typical 640. If you don't have credit, Guild will accept non-traditional credit checks, such as on-time utility payments.

Best for in-person experience: PNC Bank

Not all big banks issue USDA loans, but PNC Bank does — and it has 2,000 branches nationwide. Its Community Loan is available with as little as 3% down and no PMI.

Flagstar Bank has several grants and discounts for first-time homebuyers, including the Gift Program, which gives 3% of the home price back. The Power-Up program enables eligible first-timers to get $8,000 in grants to put towards their home purchase.

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