USDA Property Eligibility
USDA eligibility is determined primarily by the property location as well as a borrower’s household income. Properties must be located in rural areas as defined by the USDA. Borrower’s income must not exceed USDA income limits.
Let’s take a look at both.
- Primary residence only, rental or second homes are not okay.
- The property must be owner occupied.
- Existing homes must meet HUD minimum property standards.
- Condos are okay, but must be part of a HUD-approved condominium project.
- Modular homes, new and existing are eligible. Existing modular homes must meet HUD standards.
- New construction if fine, but borrowers must use interim loan because USDA is final loan only (also known as an end loan), not a construction-to-permanent loan.
- Manufactured homes are fine.
- No income producing properties allowed. Light sources of income like crafts sold at a Farmer’s Market are fine. You cannot operate a commercial farm and still qualify for a USDA loan.
USDA Eligible Areas
Rural Development (RD), a division of USDA, determines eligible areas using Census data. To receive a USDA loan guarantee, the property must be located within a USDA eligible area. You can search by address using their search tool.
USDA Income Eligibility
USDA loans are intended to assist low and moderate-income households. Therefore, borrowers looking for a USDA guaranteed loan must have incomes that do not exceed the moderate income threshold. Specifically, household income cannot exceed 115 percent of the median income for the area.
This is one of the things that makes USDA loans unique. Borrowers must make enough money to pay the loan back, but not too much that would disqualify them from being eligible. Someone should re-name this the Goldilocks Loan.
USDA Income Limits
One way to determine the USDA income limit of a particular area is to download the Department’s PDF which breaks down states and counties.
There’s also an online calculator where you can provide information and get results back that tell you whether or not you qualify. It’s pretty quick and easy to do. Here’s what you’ll need to know to complete it.
- Number of household members
- Property location
- Dependents, elderly, disabled members of the household
- Child care deduction
- Medical expense deduction
- Disability expense
- Gross monthly income
When you are finished, the calculator will display the results.
- Adjusted gross income
- Status: Eligible or ineligible for 502 Guaranteed Rural Housing Loan Program (this is a loan made by lenders)
- Status: Eligible or ineligible for 502 Direct Rural Housing Loan Program (this is a loan made by USDA)