USDA loans come with great benefits, but not all homes are eligible. All homes financed by a USDA loan must first meet the minimum property standards set out by the Department of Housing and Urban Development.
These ensure borrowers are getting a functional, safe and sound home to live in. Let’s look at the requirements more in-depth.
USDA loans can only be used when the home is the borrower’s primary residence. You can’t use the USDA loan program to buy a vacation house, second home, or rental/investment property.
Beyond being your primary residence, the house also needs to meet these USDA loan property requirements:
Income-producing properties are ineligible for the USDA home loan. If your property contains a barn, livestock facility, silo, or greenhouse that is no longer in commercial use, there’s a chance it may qualify. Discuss the situation with a USDA lender first to be sure.
USDA property requirements may not allow for investment properties or second homes, but there is flexibility in the type of residence you can buy. These mortgages can be used to finance new construction, manufactured homes, modular homes, condos, townhomes, and other alternative properties. Foreclosed homes and short sales are also eligible.
There are no maximum acreage limits for USDA loans. You can use these mortgages to purchase a property of any size — big or small, so long as it meets the minimum property requirements outlined above.
However, the USDA requires appraisers to show comparable properties sold in the nearby area within the last 6-12 months. The larger the property, the harder it can be for appraisers to find comparable home sales as required by the USDA.
Yes, you can use a USDA loan to buy a fixer-upper, but there are rules. The estimated renovation cost can’t be more than 10% of your loan amount. The home must also be in livable condition.
Remember: The USDA loan can only be used on a primary residence, so you’ll need to live in the home while renovations are underway. This means you can only buy a home in need of minor repairs and cosmetic updates. All renovations must be completed within 180 days of your closing.
If you’re considering using a USDA loan for your home purchase, reach out today. We’ll help you evaluate whether your home meets USDA minimum property requirements and guide you one-on-one through the process.
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