USDA Loan Property Eligibility Requirements
Though USDA loans are often referred to as rural housing loans, you don’t have to live in the country or purchase farmland to use them. In fact, you might be surprised at just how much of the country is actually eligible for these loans.
According to the Housing Assistance Council, a whopping 97% of U.S. land is located within USDA-eligible boundaries. Those areas claim about 109 million Americans — or around a third of the country’s entire population.*
Buyers in large cities and more densely populated suburbs aren’t eligible for these loans, but many living in surrounding towns and cities may be. An area with a population of 35,000 or less can be considered “rural” in the USDA’s eyes.
The easiest way to determine USDA property eligibility is to look up the address in the map above. Simply type the property address into the tool, press enter, and you’ll see if the home is eligible for USDA financing. If the property shows up in a shaded area of the USDA eligibility map, it is not currently eligible.
What is Considered a “Rural” Area According to the USDA?
A home must be located in a “rural” part of the country to be eligible for USDA financing. To set these rural areas, the USDA factors in a community’s population, its proximity to a major metropolitan statistical area (MSA), and overall access to mortgage credit in the area.
Rural areas must fall into one of the three following categories:
- It must have no more than 10,000 residents.
- If the area has 10,001 to 20,000 residents, it cannot be located in an MSA. There also must be a serious lack of mortgage credit for low- and moderate-income families.
- If the area has 20,001 to 35,000 residents, it must have once been considered rural but lost its status in the 1990, 2000, or 2010 Census. Again, there also must be a serious lack of mortgage credit in the area.
As you can see, there’s a lot that goes into determining a city’s (and a property’s) USDA eligibility. To see eligible areas in your region, simply search a local address on the USDA property eligibility map. Any land outside the shaded areas on the map is fair game.
Other Property Eligibility Requirements
Choosing a home in a designated rural area is only the first step to qualifying for a USDA loan. That home will also need to be your primary residence — not an investment or income-earning property.
The property also needs to:
- Have functional heating and cooling systems
- Offer easy access from a paved or all-weather road
- Be structurally sound, with a foundation that will last for at least the life of the mortgage
- Have adequate roofing
- Have a functional and operational electrical system without any frayed or exposed wiring
- Offer working plumbing and adequate water pressure to ensure waste removal
After you’ve applied for your loan, your USDA lender will send out an appraiser to assess the home’s value and condition and ensure the home meets all the above standards.
Why USDA Loans?
USDA eligible homes open the door to countless benefits. For one, USDA loans require no down payment, which can make purchasing a home significantly more affordable upfront.
They also have lower interest rates than many other loan programs, and their guarantee fee — the USDA’s approach to mortgage insurance — is cheaper than on other mortgages as well.
Finally, USDA loans also have lax credit standards compared to many mortgage loan options. That can make it easier to qualify for the loan in the first place.
What’s Next?
Once you’ve used the USDA loan map to determine if a property is eligible, your next step is to confirm you meet income requirements. The amount you can earn to have access to USDA loans is limited and varies by location and household size, so use this tool for more specific guidance.
After you’ve confirmed eligibility on both points, it’s time to apply for preapproval with a USDA-approved lender. You can then include the preapproval letter with your offer, which could help you stand out from other buyers.
The Bottom Line
Leveraging a USDA property eligibility map is only the first step if you want to use these valuable loans in your homebuying journey. Want more help buying a home with a USDA loan? Get in touch with Neighbors Bank today. Our USDA-approved loan officers are here to guide you.
*Source: Housing Assistance Council Rural Housing Research Report
