The USDA loan program is designed to provide low-to-moderate income families the opportunity to purchase a home in rural and suburban areas.
The USDA's broad definition of a rural area makes the vast majority of the United States eligible for USDA funding, however the actual property must meet the USDA's other minimum property requirements for final approval.
USDA Loan Property Eligibility Map
Datapoints in the USDA property eligibility map below are sourced from the U.S. Department of Agriculture. Areas in red are not currently eligible for USDA-backed home loans.
What is a "Rural" Area?
For a home to meet the USDA's rural definition, it must be in an area that's located outside of a town or city and not associated with an urban area.
The USDA's guidelines on the definition of a qualified "rural area" includes:
- A population that doesn't exceed 10,000, or
- A population that doesn't exceed 20,000; is not located in a metropolitan statistical area (MSA); and has a serious lack of mortgage credit for low- to moderate-income families, or
- Any area that was once classified as "rural" or a "rural area" and lost its designation due to the 1990, 2000 or 2010 Census may still be eligible if the area's population does not exceed 35,000; the area is rural in character; and the area has a serious lack of mortgage credit for low- and moderate-income families.
These guidelines are generous in the sense that many small towns and suburbs of metropolitan areas fall within the requirements.
Minimum USDA Property Requirements
The USDA wants to ensure that the home you choose meets certain property requirements to protect the borrower's interest and well-being.
First and foremost, the home must serve as your primary residence. Fortunately, many property types are eligible for USDA loans apart from purchasing a pre-existing home, such as:
- New construction
- Manufactured or modular homes
- Condos and townhouses
- Short sales and foreclosed homes
USDA loans cannot be used for investment properties, meaning farms, rental or vacation homes, and other income-producing properties aren't eligible. However, a property with acreage, barns, silos and so forth that are no longer in commercial use may still qualify.
Specific USDA Home Requirements
The USDA requires the home to be structurally sound, functionally adequate and in good repair. To verify the home is in good repair, a qualified appraiser will inspect and certify that the home meets current minimum property requirements set forth in HUD's Single Family Housing Policy Handbook.
A few of these standards include:
- Access to the property: The property should be easily accessible from a paved or all-weather road surface.
- Structurally sound: The foundation and home must be structurally sound for the life of the mortgage.
- Adequate roof: The roof must prevent the entrance of moisture and provide sufficient minimum economic life.
- Functional heating and cooling: Heating and cooling systems will be assessed, regardless of design, fuel or heat source. Central air is not required, but if installed, it must be operational.
- Operational electric system: The electrical system of the home must be adequate and up to date, with no frayed or exposed wiring. The electrical system must also be able to support typical functions and appliances for the size of the home.
- Suitable plumbing and water flow: The home must have working plumbing and enough water pressure for waste removal.
USDA loans have a different appraisal process than other loan types in the sense that the appraiser is ensuring the property meets all standards set by the USDA in addition to determining the fair market value of the property. Keep in mind that appraisals are not as in-depth as a home inspection.
Other USDA Eligibility Requirements
On the same level of importance as the USDA property requirements are the USDA's credit and income requirements. While the USDA does not impose a credit score minimum, the program does enact income limits, adjusted for family size, to ensure all loans help the low- to middle-income families that the program was designed for.
USDA income limits count toward all adult household members, but vary by location and household size. The base income limits are:
- 1-4 member household: $82,700
- 5-8 member household: $109,150
Determine the income limit in your county using our USDA income limit calculator.
While the UDSA property eligibility map shows a general idea of qualified locations, it's best to consult a USDA lender to ensure the location is in fact eligible. This is due to changes to what the USDA considers eligible as laws and populations change.