Call to get Pre-Qualified: 800-806-9836 x280
USDA Loan Pro Logo
USDA Vendor Logo

How Does the New USDA Rural Definition Affect Future Area Eligibility?

March 14th, 2014 by usdaadmin

How Does the New USDA Farm Bill Impact Eligible Areas? 

Stop the presses because I have great news to share this week. Since the Farm Bill passed earlier this year, we have been waiting on USDA to finalize their rural definition and that day is finally here. This is an important announcement, so let’s find out what this means for future USDA area eligibility!

Before we get started today, please be patient with the details.  I realize this topic can be complicated, but having this knowledge is critical for future success.

When Will The USDA Rural Definition Changes Take Effect? 

The Agriculture Act of 2014 (H.R. 2624) was passed earlier this year, which ended months of uncertainty surrounding key features of the USDA Loan Program. Also known as the Farm Bill, it authorizes $956 billion in spending over the next ten years for programs such as rural development.

Since then the USDA has spent significant time working to finalize their rural definition, along with when the changes would take effect. The rural area definition has been amended as follows:

  • Any area deemed to be a “rural area”, beginning January 1, 2000 and ending December 31, 2010, shall continue to be classified as such until new census data in the year 2020
  • The USDA has removed the 25,000 population limit from the Farm Bill and amended it to 35,000

Additionally, Section 737 of the Consolidated Appropriations Act, 2014 (H.R. 3547) authorized any area that was eligible as of September 30, 2013, to remain eligible until September 30, 2014.

Rural Development is now in the process of implementing this new definition and revising the existing rural area maps. The new rural area definition will be implemented in the following two phases:

Phase 1, May 6, 2014:

Areas meeting any of the three following criteria shall be classified as eligible:

  • The area was eligible as of September 30, 2013; 
  • The area was eligible prior to October 1, 1990, or
  1. Was deemed eligible at any time between January 1, 2000 and December 31, 2010, and
  2. Subsequently became ineligible and was ineligible on September 30, 2013, and
  3. Has a population which does not exceed 35,000, and
  4. Is rural in character.    
  • The area population decreased following the 2000 decennial census, and the 2010 decennial census indicates it is now below the population limit for the area. Please note that additional population data does apply to this 3rd portion of criteria.

Phase 2, October 1, 2014: 

Areas meeting any of the following criteria shall be classified as ineligible:

  • The area was eligible prior to October 1, 1990, or deemed to be eligible between January 1, 2000 and December 31, 2010 AND the population exceeds 35,000 per the 2010 decennial census.
  • The area has been annexed into a larger ineligible area and has become part of the larger Census Data Place.
  • The area was formerly eligible but is no longer rural in character due to further development and urbanization that is inconsistent with the new rural area definition.

In summary, all current eligible areas will stay so until 9/30/14.  Starting in 10/1/14, is when changes will take place for any areas that fall under this criteria.  Some areas could lose their eligibility, while others can possibly gain eligibility they did not previously have.

Now that we have some certainty, this is a great time for homebuyers and their Realtors to take advantage of this window of opportunity.

back to top