USDA loans have some benefits, including a $0 down payment and looser credit guidelines than some other types of loans, but not all homes will qualify for this type of financing. USDA property eligibility is rooted in the program’s mission to help boost rural communities across the country.
In order to be eligible, the property needs to meet basic eligibility requirements set forth by the USDA. The USDA property eligibility requirements include occupancy, the physical condition of the home, and the rural area designation. It’s important for any prospective buyers to check the home’s eligibility before getting too deep in the process.
USDA Property Eligibility for Rural Areas
In order for the home to meet the rural definition, it needs to be located outside a city or town and not associated with an urban area.
Rural areas include a population that doesn’t exceed 10,000 or, when the population doesn’t exceed 20,000, the home isn’t located in a metropolitan statistical area and has a lack of mortgage credit for low income or moderate-income families.
If an area was once considered rural but then lost the destination in the last three Censuses, it could still be eligible if the population doesn’t exceed 35,000.
There is an interactive map to determine if a home meets the property eligibility requirements. Areas in red won’t be eligible for this type of loan. The property eligibility area can change yearly passed on population size and other factors.
While looking at the map can be a good start, the USDA will ultimately make a final determination about the eligibility once you complete a loan application.
Property Requirements
The USDA wants to make sure that the home you choose meets certain requirements to protect your interest and wellbeing. The home will need to be your primary residence.
There are many different property types that qualify, including new construction, modular or manufactured homes, townhomes or condos, and foreclosed homes. These loans are not used for investment properties, such as farms or vacation homes.
The home needs to be structurally sound and in good repair. A qualified appraiser needs to certify that the home meets the minimum property requirements.
Some of these standards include access to the property, functional cooling and heating, suitable plumbing, an operating electrical system, adequate roof, and the home must be structurally sound.
These loans will have a different and unique appraisal process compared to other types since the appraiser is making sure the property meets all the standards set forth, as well as determining the fair market value. These appraisers will not be as in-depth as a home inspection.
Other Requirements
In addition to USDA property eligibility, there are other requirements f0r credit and income. The USDA doesn’t impose a minimum credit score, but the program does have income limits that are adjusted for family size to make sure that low- to middle-income families are getting the loans.
The program was designed to benefit these families, which is why the limits exist in the first place. The income limits will count toward all adult members but vary by household size and location. If there is a one to four-member household, the income limit is $82,700.
