USDA loans come with occupancy requirements — or stipulations as to how USDA-financed homes can be used and by whom.
The most important USDA occupancy requirement is the primary residency requirement, which says the home must be used as your primary place of living — not a second home, vacation house, or income-earning property.
Individual scenarios can make determining eligibility a bit murky, so let’s break these rules down a bit.
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.
The homebuyer must show intent to live in the USDA-financed property over 50% of the time. Borrowers who intend to own more than one property, including the USDA loan-financed property, may face additional scrutiny to ensure they’re following USDA guidelines.
Homebuyers who intend to use the USDA loan program the way it was designed shouldn’t have anything to worry about. USDA loan specialists guide borrowers through the process and will let each person know what documents are required for USDA underwriting.
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 into the property as soon as they’ve been discharged.
This requirement can be seen as a deadline to abide by the basic primary residence requirement set by the USDA.
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.
If you intend to rent out your home from the start, you won’t be eligible for a USDA loan. Instead, you’ll need to use a conventional mortgage to finance your home purchase.
You must move into the home within 60 days of closing and make it your primary residence. After that, you need to stay in the home for at least 12 months before you can rent it out or allow a non-family member to live in the home full-time.
The USDA does not allow for non-occupant co-borrowers. USDA loans are designed for occupants only, so if you’re considering using a non-occupant to qualify for a mortgage, you’ll need to consider an FHA or conventional loan instead.
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