An In-Depth Look at USDA Loan Occupancy Guidelines
USDA loans offer a path to homeownership that’s more affordable and accessible for many Americans, especially those in rural areas. Backed by the U.S. Department of Agriculture, USDA rural development loans are designed to strengthen rural communities and support low- to moderate-income buyers by offering no down payment and competitive interest rates.
Because of this mission, USDA loans come with specific rules that other loan types don’t. One of the most important is the occupancy requirement.
USDA loans come with an occupancy requirement. This is a rule that stipulates who can live in a USDA-financed property and when they can live there.
First and foremost, the home must be your primary residence, meaning you must live in it full-time and plan to move in within 60 days of closing. You cannot use the property as a second home, vacation house, or rental.
In general, only the borrower and their immediate family members may live in the home. If the borrower or a family member requires regular or full-time care, the caretaker is not permitted to reside in the home. Additionally, adopted children and exchange students may live on the property as long as the borrower is not compensated for their care or claiming their income.
Lenders will evaluate unique living arrangements on a case-by-case basis, so it’s important to disclose all intended occupants early in the loan process.
To comply with USDA loan requirements, borrowers must plan to move into the home within 60 days of closing. This means the home should be habitable and ready for occupancy at that time.
But what exactly qualifies as a “primary residence?” According to USDA guidelines, a primary residence is where you live full-time. It cannot be a:
The USDA also expects borrowers to maintain the property as their primary residence for a reasonable period, typically at least 12 months. However, there’s no official USDA rule requiring you to stay exactly one year before you can rent or sell. Rather, the intent and pattern of usage matters most.
Yes. Life happens, and the USDA does allow for exceptions in certain situations:
Failing to meet USDA occupancy guidelines could be considered a violation of loan terms, which may result in:
To stay in good standing, be clear about your intent to live in the home and notify your lender if your situation changes.
While USDA loans are designed for owner-occupants, life situations can evolve. Here’s what you need to know about renting and roommates.
In general, USDA rural development loans do not allow you to buy a home with the intent to rent it out. These loans are for primary residences only.
That said, the USDA understands that plans can change. Renting out your home may be permitted if you:
Renting the home too soon after purchase, especially without notifying your lender, can jeopardize your loan standing.
Yes, roommates are allowed. The USDA does not prohibit roommates or housemates from sharing the space with you. However, your lender will consider your roommate’s income as “household income” even if their name isn’t on the loan.
Your roommate could make you ineligible for a USDA loan, so you may have to live in the house without a roommate or obtain a different loan type and have the roommate continue to live with you.
If you want or need a roommate in the future, note that there is no post-closing check for income changes, so you may be able to get a roommate later.
However, there are a couple of key limitations:
Short-term rentals like Airbnb or VRBO are not permitted under USDA loan terms. These properties are not intended for commercial or hospitality use.
Likewise, subleasing part or all of your home to others while you live elsewhere would violate USDA occupancy requirements. Always check with your lender before entering any rental or sublease agreement.
It might. You cannot rent out your USDA-financed home from the start. If you apply for another USDA loan in the future, you’ll need to prove:
Owning multiple USDA-financed homes at once is generally not allowed, so renting out your current home could make getting another USDA loan more difficult.
Let’s break down a few common scenarios to show how USDA occupancy requirements apply in real life:
1. Purchasing a Built Home
Buyers using a USDA loan to purchase an existing home must move in within 60 days of closing and use the home as their full-time residence. No exceptions unless approved due to hardship or military service.
2. New Construction
USDA loans can finance newly constructed homes, though not all lenders offer this option. The home must be completed within 12 months, and you must move in as your primary residence once construction is complete. This process often involves two loan closings: one for the construction phase, and one for the permanent mortgage.
3. Borrowers Who Already Own a Home
You can still get a USDA loan even if you own another home, as long as the USDA-financed property becomes your primary residence. You can also purchase another home if you are not financially responsible for another Agency-guaranteed or direct home loan, you’re financially qualified to own more than one home, the current home no longer meets your needs (such as due to relocation, a growing family, a divorce, or you are a non-occupying co-owner or borrower on another mortgage and want to purchase your own dwelling.
4. Active Duty Military Borrowers
If you're on active duty and cannot move in within 60 days, a spouse or dependent can fulfill the occupancy requirement for you. You must also intend to live in the home once your military service ends.
5. College Students
Students may qualify for a USDA loan if they have current adequate income and show employment prospects in the area after graduation. They must also intend to live in the home full-time. Lender discretion applies, and additional documentation may be required.
To ensure a smooth USDA loan process (from application to closing to moving in) borrowers must be proactive, transparent, and responsive at every step. USDA loans are designed to support stable homeownership in rural communities, so lenders take occupancy requirements seriously. Meeting these expectations helps your loan close on time.
Borrowers should be clear about their intent to occupy the home as their primary residence. USDA loans cannot be used for second homes, vacation properties, or rental investments, so communicating your plans upfront is essential.
For example, if you plan to use a power of attorney (POA) to sign closing documents on your behalf — if you're deployed, traveling, or otherwise unavailable — you should let your lender know as early in the process as possible. Delays in POA verification can stall underwriting and risk missing the 90-day USDA loan closing window.
Throughout the loan process, your lender may request additional documentation, such as employment verification, proof of income, or living arrangement clarification. Responding quickly helps avoid processing bottlenecks and keeps your loan timeline on track.
Any delays can jeopardize the loan. Maintaining open communication and promptly fulfilling lender requests is one of the most important things you can do to ensure success
Lenders will assess whether you genuinely intend to live in the home full-time. This means:
If any part of your situation changes, for example, you receive a job offer in another city or experience a personal hardship, talk to your lender immediately. In certain cases, such as military deployment or medical emergencies, exceptions may apply, but only if the lender is informed and can properly document the situation for USDA approval.
Eligible homes must be:
Check your property’s eligibility using the USDA eligibility tool.
The home must meet USDA Minimum Property Requirements (MPRs). This means the home must be:
If minor repairs are needed, some homes may qualify for a USDA repair loan or a contingency holdback at closing.
USDA loans make homeownership more achievable for those who need it most. In exchange for affordable terms and no down payment, you can contribute to the long-term vitality of your community.
Understanding and respecting the occupancy requirements allows you to remain in good standing with your loan and be well on your way to building a stable, secure future.
To learn more about USDA loan requirements, contact a home loan specialist today.
The USDA expects you to live in the home as your primary residence for at least 12 months. Renting before that may violate loan terms unless approved due to hardship or relocation.
There’s no minimum time before selling, but you must demonstrate that the home was your primary residence. Selling too soon may raise questions about your initial intent to occupy the property.
