USDA Rural Development sets income limits by household size and county. As of 2025, the standard income cap in most Iowa counties is $112,450 for 1–4 person households. These limits were recently increased to allow more families to qualify.
Some higher-cost areas have higher income thresholds. For example, the Des Moines metro area allows about $129,950 for a four-person household, while the Iowa City area is around $132,700 for a family of four. The exact limit depends on county and household size, since USDA defines “moderate income” as 115% of the local median income. Families slightly above the standard limit may qualify in counties with higher median incomes.
Note: Income calculations include the total household income of all adults, not just the borrower on the loan. USDA allows certain deductions (for dependents, childcare, etc.) to adjust the income. To be eligible, your adjusted household income must fall at or below the limit for your area and family size. You can use USDA’s online income tool or consult the Iowa USDA office to find the precise limit for your county.
USDA-Eligible Towns and Rural Areas in Iowa
USDA loans in Iowa are intended for rural and small-town areas. In Iowa, this covers the vast majority of the state. In fact, only about 3–4% of Iowa’s land area is ineligible, mainly the more populated city centers. Most communities with populations below ~35,000 remain eligible for USDA financing.
Examples of eligible towns
- Solon
- Tiffin
- Williamsburg
- Swisher
- Newton
However, major Iowa cities and their dense suburbs are excluded. For instance, downtown Des Moines, Cedar Rapids, Davenport, Waterloo, Iowa City, and other large city limits do not qualify.
Eligibility Requirements in 2025
To qualify for a USDA loan, borrowers must meet USDA and lender criteria regarding income, credit, and financial stability:
Income Eligibility
Your household income must be under the local limit (typically ≤115% of area median). USDA will count income from all adult household members, even if they aren’t on the loan. There is no minimum income but there is a maximum based on the limit.
Credit Score
There is no USDA-mandated minimum score, but most lenders require a minimum of around 640 for an automated approval. If you have a FICO score fo 640 and higher, this will make the process much smoother.
Debt-to-Income (DTI)
USDA guidelines suggest a DTI around 41% or lower meaning your total monthly debts ≤41% of gross income. This includes the new mortgage payment, property taxes/insurance, and any other debts.
Employment and Income Stability
Lenders will expect about 2 years of steady employment or income history in the file. You don’t necessarily need to work at the same job for two years, but a consistent work history is important. Self-employed borrowers can also qualify but must show at least two years of satisfactory income from their business. Overall, the USDA program wants to see that your income is stable and likely to continue.
U.S. Citizenship or Residency
USDA loans are only available to U.S. citizens or permanent residents with green cards. You’ll need to provide a Social Security number and, if not a citizen, proof of permanent resident status.
Primary Residence Only
The home must be owner-occupied as your primary residence. You CANNOT use a USDA loan to buy an investment property or a vacation home. Additionally, you agree not to rent out the property.
Property Requirements and Inspection Standards
Key property requirements for 2025 include:
Location
The home must be in a USDA-eligible rural area. This is checked by the appraiser and lender using the USDA maps.
Type of Property
The program is generally limited to standard residential properties. The property should be a typical residence – farm properties are allowed only if the home is the primary value. Also, there should be no structures primarily used for income like large barns or commercial greenhouses.
Condition and Safety
USDA requires the home to be “decent, safe, and sanitary”. In practice, this is very similar to FHA’s minimum property standards. The appraiser will verify that the house meets certain minimum standards:
- The dwelling should have a sound structure,
- all major systems (heating and cooling, electrical, plumbing and roofing) must be functional,
- there should be adequate utilities and water/sewer,
- the property needs to be accessible by a road or driveway year-round,
- electrical wiring should be in good repair,
- windows and doors should be functional.
In other words, the property should be a modest, residential dwelling in good repair.
USDA Loan Interest Rates and Benefits
USDA mortgages offer significant benefits that make them very attractive, especially when compared to other loan types like FHA or conventional:
- Zero Down Payment
- Low Interest Rates
- Reduced Mortgage Insurance
A USDA loan in 2025 offers zero down, low fixed interest, and low monthly cost. Many Iowa homebuyers in rural areas find that USDA’s combination of no down payment and low rate/insurance often yields a lower monthly payment than even an FHA loan with 3.5% down.
USDA Loans in 2025: Availability and Recent Changes
Are USDA loans still available in 2025? – Yes. The USDA Rural Development home loan programs continue to be fully funded and available in 2025. There have been no major cutbacks to the program and Congress has continued to support USDA’s rural housing initiatives.
The only notable changes recently have been adjustments to what areas are considered rural (based on the 2020 Census) and some behind-the-scenes guideline updates. Because of that, a few growing communities in Iowa (like North Liberty) lost rural eligibility. On the other hand, any areas that remain under the population limits are still eligible (35,000 for USDA rural definitions).
Also, there have been no changes to the core benefits: the zero-down feature, low interest rates, and guarantee fees for USDA loans in 2025 are the same as recent years while the upfront fee is still 1.00% and annual fee 0.35%.
Overall, USDA’s single-family loan program remains stable and active heading into 2025.