Property Eligibility Requirements For USDA Loans
Please note that this isn’t an exhaustive list of requirements. For the details in your area, reach out to your nearest USDA Rural Development office.
The general eligibility guidelines for the USDA loan program include that the property must be:
In A Rural Area
Properties purchased with a USDA loan must be in an approved rural area. A rural area is generally defined as a region outside a major city with fewer than 35,000 residents.
USDA loans aim to assist low- and moderate-income households in rural areas. Many small towns and suburbs just outside of metropolitan areas also qualify as rural under these guidelines.
A Primary Residence
To qualify for a USDA loan, you must agree to use the home as a primary residence. It can’t be a vacation or investment property. Borrowers can use a variety of property types as a primary residence, including:
- New construction homes
- Condos
- Townhomes
- Modular and manufactured homes
- Foreclosed homes
A Modest Size
USDA loans are supposed to help home buyers purchase modest-sized homes. The USDA typically defines modest size as less than 2,000 square feet.
However, you should know there’s no limit to the parcel size, meaning there’s no limit to the amount of land the home sits on.
Structurally Sound And Fully Functional
The property must meet certain safety requirements to qualify for a USDA loan. It must have a structurally sound foundation, an adequate roofing system and contain all major systems, including heating and cooling, plumbing and electrical.
Have No In-Ground Swimming Pool
You can’t use a USDA loan to purchase a home with an in-ground pool or other prohibited amenities.
Pass USDA Lender Appraisal Guidelines
The property must pass an appraisal before a lender can approve a USDA loan. The appraisal estimates the home’s fair market value and ensures that it meets minimum property requirements. An appraiser typically:
- Verifies the home is up to code
- Establishes the home’s square footage
- Establishes the number of beds and bedrooms
- Confirms there are no income-generating structures or prohibited amenities
The home buyer typically pays for the USDA appraisal, but this will depend on the lender.
