Occupancy Requirements For The USDA Loan Program
To qualify for a USDA home loan, you must purchase a property in a qualified rural community and intend to live there as your permanent residence, full-time.
The USDA home loan program is intended to strengthen the real estate market in smaller, rural communities where it has traditionally been difficult for people to obtain funding for homes.
No matter whether you have low or moderate income compared to the median income in the area, you may qualify for loan funding. However, you also need to be aware of the specific requirements of residency.
The USDA home loan program is unique in that you can use the funding for a second home. However, the residency requirements remain the same no matter whether the home is your first or your second.
The main thing to understand about residency is that you must be occupying the home full-time as your permanent residence. This permanent residence requirement makes it difficult to, for example, use multiple different types of government loans to acquire more property.
Likewise, no matter what community you are living in, you may not be domiciled in adequate housing in the local area before you take out the loan.
Naturally, there are some other things to be aware of when it comes to occupancy. When you contact our team, our network of qualified loan experts will be able to provide you with all the information you need to meet the USDA loan program guidelines.
USDA loans are similar to other federal loan programs, such as FHA loans, in many ways. The payment period for a USDA loan is the same as an FHA loan: You can repay it for 30 years.
The 30-year period gives you plenty of time to repay your loan without having to worry about any kind of surprises or difficulty while you are doing it.
A USDA Guaranteed home loan is a fixed rate loan, meaning that throughout the course of your loan period, your rates cannot go up and your payments will usually remain largely the same. In many cases, fees are 'front-loaded' so that your fees will actually go down over time.
USDA home loans are accessible only to buyers in qualified rural areas. Only experts such as our team can tell you for certain if the community where you plan to live is in a qualified rural area. It's important to remember that rural areas typically have less than 25,000 people.
With a USDA loan, you will be able to finance 100% of the purchase cost of your home. That means you will not have to put any money down at all, unlike when you are using an FHA loan.
In fact, your total financing can reach up to 102%, which allows you to finance closing costs.
What kinds of properties are allowable under the occupancy guidelines? They are:
- Primary residence properties that are intended for single families
- Existing or new homes intended for single family occupation
- Condominiums (with special approval)
- New manufactured homes or existing manufactured homes previously financed under USDA
Investment or income properties are not eligible for the program. The house you buy does not need to be the very first house you have ever purchased, but it must be your primary residence.
The USDA home must provide safe, sanitary housing conditions and cannot have any unusual amenities. For example, a home with a pool will probably not qualify for financing.
Although virtually any U.S. citizen can potentially qualify for a USDA loan, the loan can only be used in a relative number of rural communities throughout the United States. These loans are insured by the U.S. federal government through the Department of Agriculture.
Banks that wish to offer USDA loans must meet strict federal standards. In exchange, they are provided with a guarantee that protects them from loss for over 90% of the total loan value.
People who qualify for the USDA loan are eligible for 100% financing of their new home.
A USDA home loan provides you with an easy and convenient schedule of 30 years of payback combined with fixed rates. This makes the loan easy to understand and easy to budget for. It is also easy to select properties that will qualify for the loan.
If you are attempting to buy a new or existing single-family home, a new manufactured home, certain condos or a townhome, then you are likely to qualify. There are certain restrictions, too:
- There must be direct access to the property from a street or driveway
- Local, regional, state or federal agencies must approve all subdivisions
- Adjoining roads and streets need to be surfaced with 'all weather' protection
USDA loans are not limited to first-time buyers. If you are purchasing a home in a rural community to serve as your primary residence, you might qualify. Our team will help you to make sure that you get excellent rates.
Why are these loans available only in certain places?
The purpose of the loan program is to strengthen the real estate market in rural areas and provide funding for people who might otherwise have had difficulty purchasing a home.
What properties can be bought with this loan?
Existing or new single-family homes, new manufactured homes, townhomes, and some approved condominiums are eligible. The owner must occupy the home full time.
What program restrictions are there?
If you own other property, then the other home you own must not be within commuting distance of your USDA home. You might also be restricted in how you can use rent money. You also cannot have corrals, barns, or other potential income-producing structures. Typically, a pool will disqualify the property, and special steps must be taken if the home is in a flood zone.
Where can I purchase a home?
The home must be located in a qualified rural area according to USDA guidelines. However, some of these areas are located within a very short distance of major metro areas.
What are the other requirements?
A borrower must be at least 18, be a U.S. citizen or qualified alien, not have an adequate home in the area, plan to occupy the home full-time and be unable to achieve conventional loan funding.
We Are The USDA Loan Experts
Find out what USDA loan program your scenario or property is eligible for.