USDA Loan Occupancy Requirements
In addition to requirements for property condition and eligibility, USDA loans have occupancy requirements that specify how homes can be used and by whom.
In a nutshell
To meet USDA loan occupancy requirements, you must:
- Move into the property within 60 days of your loan closing
- Occupy the home for at least 12 months
- Live in the home for the majority of the time
- Ensure any co-borrowers also live in the home for the majority of the time
Before digging into USDA occupancy requirements, make sure to check your USDA eligibility.
You can do this by using our income limits tool to ensure that your household makes less than the USDA's cap set and by using our property eligibility tool to ensure that the house you want to buy is located in a USDA-eligible rural area.
Individual occupancy scenarios can make determining eligibility somewhat murky, so let's break these rules down.
USDA Primary Residency Requirement
Borrowers hoping to leverage the benefits of USDA home loans to fund an investment property will be disappointed. The USDA's guidance on this rule is firm. USDA home loans are meant for personal use as your primary place of living, and any applications indicating otherwise will be denied.
How is “primary residence” defined?
The homebuyer must show intent to live in the USDA-financed property over 50% of the time in any given year. If you already own another home or plan to buy another home in the future, you may be required to provide proof that the USDA-financed home remains your primary residence.
As long as you do not plan to use the USDA-financed home as a rental while living elsewhere, you shouldn’t have anything to worry about. Your lender should guide you through the process and let you know what documents USDA underwriting requires.
Who is allowed to live in a USDA-financed home?
The USDA doesn't have any specific requirements regarding who can live in the home. However, USDA loans are intended to help homebuyers finance their primary residence and not an income-producing property.
Keep in mind that anyone who plans on living in the home will have their income considered and calculated toward the USDA income limit unless an exception applies.
USDA Loan Co-signer and Co-Borrower Rules
USDA loans can also include co-borrowers or co-applicants who intend to live in the home and share ownership of the property. Co-borrowers can help a primary borrower qualify for a loan, especially if they do not meet the income or credit qualifications on their own.
USDA loan co-borrower requirements are generally the same as those for primary borrowers. Notably, co-borrowers must also use the home as their primary residence.
Can you have a non-occupant co-signer on a USDA loan?
USDA loans do not permit non-occupant co-signers. A co-signer is financially responsible if the primary borrower defaults but has no ownership over the home. Therefore, they cannot be considered occupants and cannot qualify for a USDA loan.
If you’re considering using a non-occupant to qualify for a mortgage, you’ll need to consider an FHA or conventional loan instead.
What happens if you get married after a USDA loan?
Unlike other loan types, USDA loans consider the income of everyone in your household—even if they aren’t listed on the loan application. If a primary borrower on the loan has a significant other who will be living in the home with them, the significant other's income will be considered towards the income cap. If you purchased a home as a single person to live in alone, and then down the line had a spouse, significant other, or even a roommate move in, it can affect the eligibility for refinancing with a new USDA loan.
FAQs About USDA Loan Occupancy Requirements
Why do borrowers need to move in within 60 days of closing?
To fulfill minimum USDA loan occupancy requirements, borrowers must move into the property within 60 days of purchase, making it their full-time residence. Some exceptions are allowed.
For example, active duty service members’ families can occupy the property in their place, assuming the military member intends to move in as soon as they’ve been discharged.
This requirement can be seen as a deadline for complying with the USDA's basic primary residence requirement.
Can I rent out my USDA home?
If you intend to rent your home from the start, you won’t be eligible for a USDA loan. Instead, you’ll need a conventional mortgage to finance your home purchase.
USDA guidelines prohibit borrowers from immediately converting the home into a rental after purchase. If your circumstances change in the future—such as relocating for work—you may be allowed to rent out the home, but you must demonstrate that you initially used the home as a primary residence in accordance with USDA requirements. You also must occupy the home for at least 12 months before you can rent it out.
How long do you have to live in a USDA home before selling?
There aren't restrictions on how long you have to occupy a USDA home before selling, as long as the mortgage is paid off fully when the title is transferred.
Have any other occupancy-related questions?
Talk to a USDA loan specialist at Neighbors Bank!
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