USDA vs FHA: Which Is Actually Cheaper?

For buyers who qualify for both, USDA is usually the cheaper loan over time: zero down versus FHA's 3.5%, a lower upfront fee (1% vs 1.75%), and a lower annual fee (0.35% vs 0.55%). FHA wins on flexibility, since it's available everywhere and accepts lower credit. The right answer depends on your location, income, and credit.

Where USDA wins: cost

USDA requires no down payment, versus FHA's 3.5% minimum. Its upfront guarantee fee is 1% (FHA's is 1.75%), and its annual fee is 0.35% (FHA's is 0.55% on most loans). On a $250,000 loan, that difference is roughly $79 a month, around $28,000 over 30 years. For a buyer who qualifies for both, USDA is typically cheaper by a meaningful margin.

Where FHA wins: flexibility

FHA has no geographic restriction, so it works in cities where USDA doesn't. It has no income limit, so high earners disqualified from USDA can still use it. And its practical credit floor (580 for 3.5% down) is more forgiving than USDA's typical 640. If you earn too much for USDA, live in an ineligible area, or have credit in the low 600s, FHA is your program.

The shared drawback

Both carry mortgage insurance for the life of the loan on most files, so neither lets you drop the fee at 20% equity the way conventional PMI does. With both, the way out is refinancing into a conventional loan once you've built enough equity.

How to actually decide

Three questions: Does your address qualify for USDA? Is your household income under the USDA limit? Is your credit strong enough? Yes to all three, USDA is almost always cheaper. No to any, FHA is likely your route. Run your numbers through both at prequalification to know for certain.

For how both programs sit alongside every other option, see the loan types hub.

Verified as of 2026. Fee figures are reviewed each federal fiscal year and refreshed here annually.