How Do You Find a USDA Choice Home?
You and/or your family are ready to purchase a home in a rural community. You have researched and decided that a USDA home loan guarantee is perfect for you to help obtain a mortgage. You have contacted a USDA approved lender and successfully applied and are pre-approved for a home loan. Now what do you do?
Before you begin searching for your home, there are a few things you must take into consideration. There are restrictions on where the home is located. The home must be up to construction standards. And the home must meet the size and cost within your approved mortgage budget.
Finding the perfect home is like finding the proverbial needle in a haystack. Add the qualifications required by your mortgage guarantor, and it makes finding the perfect home even harder. But if you start with the limitations and restrictions in mind, you will have a much easier time locating a home that is suitable and functional for your family's needs.
A qualified rural area
A home purchased through the USDA home loan guarantee program must be located in a qualified rural area. Qualified rural area is defined as open country places, and homes in cities with populations of 10,000 or less. Under certain conditions, the home may be located in towns and cities of 10,000 to 25,000 in population. If you have questions regarding whether a potential home is in a qualified area speak with a representative from a USDA Rural Development field office.
New or existing home
You can shop for a new home recently constructed, or an already existing home. If you decide upon purchasing a new home built within the last 12 months, you will need the following:
- A certified home inspection approving the soundness of the foundation, framing, and meeting all local and state codes.
- Certificate of occupancy.
- A builder's 1-year home warranty.
If you decide to look for a home previously built, meaning it was constructed more than 12 months prior, the home must meet the following requirements to qualify for a USDA home loan guarantee:
- Structurally sound - The home must have been built using materials that achieve a structurally sound construction. The home must be in good repair at the time of purchase.
- Functional - The home must adequately functional as a dwelling. An adequate bedroom to bathroom ratio is taken into consideration. A functional home must have running water, appropriate ingress and egress, and adequate heating, cooling and venting. A barn converted into livable quarters may indeed make a good home. But it must meet the functional test.
- Any size or design - A USDA home loan mortgage is good for homes that are any size and design. As long as you the borrower qualify for the mortgage amount, you could purchase any size home that meets the needs of your family. However, the USDA home loan program stipulates that the home must be "modest" in size and design. According to the USDA Rural Development website, modest is "property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features."
- Owner occupied only - The home you purchase for yourself or your family must be your primary dwelling. Homes purchased through the USDA home loan guarantee program cannot be income producing, meaning you may not rent the home to others or make it a commercial building.
A previously constructed home must also show documentation and certification of a termite report, as well as a qualified home inspection.
Finding the right home to purchase using the USDA home loan guarantee program can be daunting. But knowing first-hand what you need to look for will help you shorten your shopping time - allowing you to move into a beautiful home soon!