Did you know that USDA loans don’t require a down payment?
If you’re someone who makes at or below the average salary of your area, then you could potentially qualify for a USDA loan to help you buy a house in a rural part of the United States.
However, it’s not always as easy as it sounds. You have to find a home that’s also eligible for a USDA loan, and determining USDA property eligibility is a bit more involved.
How to Determine USDA Property Eligibility
There are a few factors that go into determining whether or not a property is eligible for a USDA loan, including:
- Home Value
- Structures on the Property
USDA loans are meant to help low-income and medium-income families buy homes when they otherwise couldn’t while also stimulating the economy of rural America—that means that there are a ton of restrictions on the homes.
The physical location of the property plays a big role in the eligibility of a USDA loan.
USDA eligible properties have to be part of a rural area, so things like population size and even city limits matter.
Populations that are under 20,000 are generally considered rural unless it’s labeled a metropolitan statistical area. It also helps if the mortgage credit in the area is low since that’s what the USDA is trying to target. If the population is less than 10,000 then it’s automatically considered a rural area.
Even if an area isn’t designated as rural because of a Census, or it’s lost its rural title, then it can still be considered for USDA eligibility.
There are interactive maps you can use that are directly from the USDA department in your state, and a quick Google search can help you find the one for your state.
If you’re still struggling with determining the eligibility of a home, then you can contact a USDA loan advisor too! We can help you here at Trinity Mortgage.
A USDA loan is a great option for most people because it doesn’t ask for any money from you, so it covers 100% of the mortgage. Because of this, you do have to pay for mortgage insurance. However, this can cause some issues if the seller is asking for more than the property is worth.
The appraised value of the home needs to be the price the home is selling for; that’s the only way that the USDA will actually insure your loan.
While the home value itself won’t directly determine the property eligibility, it will play a role in whether or not you can actually get it. Keep in mind that you’ll only be approved for up to 30% of your income to use on a mortgage payment.
Repairs can play a part in this cost as well. The mortgage loan you get from the USDA can cover the cost of repairs, but it will need to be factored into the overall cost and taken out of the price of the house itself.
Structures on the Property
The USDA is very picky about structures that exist on the property of a home. What they don’t want is for you to make money off of a property, which typically shows up when they look at your eligibility for a USDA loan.
However, when it comes to property eligibility, things like barn structures and even too much land can stop a home from being eligible. Even if a home has a small shed, it can stop its eligibility.
Again, you’ll want to check with a USDA loan agent to make sure that the home you’re looking at is eligible.
Types of Properties USDA Eligible
The USDA is strict about the types of homes considered for the loan process. This goes back to the purpose of the USDA loan in general: to help families own a home.
In order for a home to be USDA eligible, it needs to be a single family home that’s not meant to produce income. This also means that you can’t rent out any part of your USDA home.
If you can’t find a home that you want in an area that the USDA will approve, then you can actually build one! The USDA will provide a construction loan so that you can buy the land and build a home. However, you will be required to build a home on that land immediately; you can’t just buy the land or build any type of farming structure.
You also have to buy a house with a USDA loan; at this time, you can’t buy mobile homes. The technical difference between these two is how it’s transported. A mobile home is brought in on wheels to a foundation, while manufactured homes are brought in by sections and put together on site.
You can also buy a HUD-approved condo as well. These are a little more difficult to find in rural areas though, so a house is generally the way to go. You can check to see if the condo you’re looking at is approved here.
Townhouses are also considered USDA eligible if they’re in the correct area. Because you technically gain ownership of the land beneath a townhome, you don’t have to have it approved by HUD.
If you’re still on the fence a USDA property eligibility, then the best thing you can do is contact us. Here at Trinity Mortgage, we want to make sure you’re getting the right loan for you, and we’d love to help you through that process.
Getting a USDA mortgage loan can be a tricky road to go down if you do it yourself, and that’s what we’re here for! Feel free to give us a call if you have any questions about USDA loans or how Trinity Mortgage can help you.