USDA loans come with great benefits, but not all homes are eligible. All homes financed by a USDA loan must first meet the minimum property standards set out by the Department of Housing and Urban Development.
These ensure borrowers are getting a functional, safe and sound home to live in. Let’s look at the requirements more in-depth.
USDA Loan Minimum Property Requirements
USDA loans can only be used when the home is the borrower’s primary residence. You can’t use the USDA loan program to buy a vacation house, second home, or rental/investment property.
Beyond being your primary residence, the house also needs to meet these USDA loan property requirements:
- They must be accessible: You must be able to access the property from a road, street, driveway, or another route. There should be no hazards blocking access to the home.
- They must have functional heating, cooling, and electric systems: All systems must be installed, operational and support all home functions including major appliances. No exposed wiring allowed.
- They need to be structurally sound: The home’s foundation must be free of major cracks or moisture issues. There must also be enough life expectancy in the foundation to last the life of your loan— if not longer.
- They must have adequate roofing: The home’s roof must have at least two years of life left. There can be no apparent holes, leaks or missing shingles allowing moisture into the dwelling.
- They must have access to adequate water supply and plumbing: Plumbing, water, and waste removal systems must be functional.
- They need functional doors and windows: All exterior and interior doors must be installed and be working. All windows must be in good condition and free of cracks, leaks or visible mold.
Income-producing properties are ineligible for the USDA home loan. If your property contains a barn, livestock facility, silo, or greenhouse that is no longer in commercial use, there’s a chance it may qualify. Discuss the situation with a USDA lender first to be sure.
What types of properties are eligible for USDA loans?
USDA property requirements may not allow for investment properties or second homes, but there is flexibility in the type of residence you can buy. These mortgages can be used to finance new construction, manufactured homes, modular homes, condos, townhomes, and other alternative properties. Foreclosed homes and short sales are also eligible.
Note: At Neighbors Bank, we do not currently finance construction loans.
Is there an acreage limit on USDA loans?
There are no maximum acreage limits for USDA loans. You can use these mortgages to purchase a property of any size — big or small, so long as it meets the minimum property requirements outlined above.
However, the USDA requires appraisers to show comparable properties sold in the nearby area within the last 6-12 months. The larger the property, the harder it can be for appraisers to find comparable home sales as required by the USDA.
Can I buy a fixer-upper with a USDA loan?
Yes, you can use a USDA loan to buy a fixer-upper, but there are rules. The estimated renovation cost can’t be more than 10% of your loan amount. The home must also be in livable condition.
Remember: The USDA loan can only be used on a primary residence, so you’ll need to live in the home while renovations are underway. This means you can only buy a home in need of minor repairs and cosmetic updates. All renovations must be completed within 180 days of your closing.
At Neighbors Bank, we don’t currently finance USDA loans that include home renovations.
If you’re considering using a USDA loan for your home purchase, reach out today. We’ll help you evaluate whether your home meets USDA minimum property requirements and guide you one-on-one through the process.
Are you eligible for a USDA home loan?
Talk to one of our USDA experts to see if you qualify.
