The main difference between the two types of mortgages is in their eligibility requirements, loan limits and down payment amounts. An FHA mortgage is insured by the Federal Housing Administration (FHA) and allows buyers to put as little as 3.5% down when purchasing a house; mortgage insurance is required. This type of loan is available to all qualified borrowers regardless of their income level, as long as they can prove they have a steady source of income.
USDA mortgages offer 100% financing for homes in certain eligible rural areas and are designed for people with low or moderate incomes living outside city limits. Borrowers pay an upfront guarantee fee and an annual fee.