What property types are NOT eligible for a USDA loan?
What properties are ineligible for a USDA Loan?
Wow, this is a great question and one of the most common we receive and in today’s video I will explain what property types are not eligible for a USDA loan and help focus your home search on properties that meet USDA eligibility requirements.
And if you have not yet done so, feel free to download our newest “USDA Blueprint for Success” with the link below. This free guide is designed to help walk you through the USDA process step-by-step and is a great educational resource for both homebuyers and Realtors alike.
USDA guidelines state that “a qualified property must be predominately residential in use, character, and design.”
Also, here are three additional requirements which can help towards determining a qualified property and site:
- Site size: As a quick reminder, USDA loans do not have a limit on acreage and provide for the following:
“There is no specific limitation to the size/acreage of the site. The appraiser must provide an explanation in the addendum of the appraisal to explain adjustments to comparable properties, how the subject compares to other properties in the area, etc.”
- Income-Producing Land: While many may associate USDA with a land or farm loan, remember that we are working under the USDA Single Family Housing Guaranteed loan program which requires that:
“The site must not have income-producing land that will be used principally for income producing purposes. Vacant land or properties used primarily for agricultural, farming or commercial enterprise are ineligible.”
- Income-Producing Buildings: Additionally, when concerned with the potential of income-producing buildings, UDSA guidelines state the following:
“The property must not include buildings principally used for income-producing purposes. Barns, silos, commercial greenhouses, or livestock facilities used primarily for the production of agricultural, farming or commercial enterprise are ineligible.”
“However, barns, silos, livestock facilities or greenhouses no longer in use for a commercial operation, which will be used for storage do not render the property ineligible.”
“Outbuildings such as storage sheds and non-commercial workshops are permitted if they are not used primarily for an income producing agricultural, farming or commercial enterprise. A minimal income-producing activity, such as maintaining a garden that generates a small amount of additional income, does not violate this requirement.”
In summary, while there are additional guidelines and requirements that we did not cover today, this will be a good starting point which covers many of the common questions that we receive and if you do come across a unique property or situation, use my team as a resource for any general or specific questions you have.
As a USDA Approved Lender in Florida, Texas, Tennessee, and Alabama, we are known for our expertise on this unique program and how to maximize its full potential for our rural communities.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
As always, I want everyone to make it a great day and look forward to seeing you right here for the next USDA Loan Pro tip of the week!
P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE