The USDA offers a 0% down payment program that makes it easier for borrowers to become homeowners despite not having money to put down on the home. The USDA has some strict guidelines that you must follow in order to get it though. This includes the number of USDA loans you can have at any given time.
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The short answer to the question is that you can only have one USDA loan. Does this mean one for the rest of your life? Luckily, the answer to that question is ‘no.’ You can have multiple USDA loans, but not at one time.
Keep reading to learn how it works.
How the USDA Loan Process Works
When you apply for a USDA loan, you have to prove eligibility. In order to be eligible you must:
- Have total household income that is less than 115% of the median income for your area
- Prove that you cannot secure any other type of financing, such as FHA or conventional financing
- Purchase a home in a rural area as determined by the USDA
- Not own any other homes
If you can prove that you are eligible, you can then apply for the USDA loan like you would apply for any other loan. You’d then have to prove that you have the qualifications to afford the loan.
As you probably noticed, one of the requirements of the USDA loan is that you don’t own any other homes. That’s why you can only have one USDA loan at a time.
What if you Own a Home?
If you own a home now, you must prove that the home is ‘inadequate.’ Whether a home is inadequate isn’t up to your discretion, though. It’s up to the discretion of the USDA. Typically, the following situations qualify:
- You live in a mobile home – The USDA doesn’t include mobile homes in their definition of adequate housing. If you own a mobile, home, you should still be eligible for USDA financing.
- Your job relocated – If you can’t stay in your current home because your job relocated you and commuting would put a strain on you, this may qualify as an exception. Typically, your new job must be 50 miles away or more in order to qualify.
- You outgrew your home – If you bought a starter home and have since had several children, there may not be adequate living space for everyone. This is up to USDA discretion, though. They base the living size on the number of family members you have to determine if it’s adequate.
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If you don’t meet any of the above exceptions, you wouldn’t be able to keep your current home. You would have to sell it if you wanted to purchase a property with USDA financing.
The USDA Rules
It’s important to know that you can only use USDA financing for owner-occupied homes. In other words, you can’t use it to purchase an investment property or vacation home. If you do meet one of the exceptions from above, you must use the USDA financing to purchase the home that you will live in full-time.
The USDA also requires:
- A 640 credit score
- A 29% housing ratio maximum
- A 39% total debt ratio maximum
- Stable income
- Stable employment
- No defaulted federal loans in the past
The bottom line is that you can only have one USDA loan at a time. It’s typically pretty difficult to get the USDA to approve an exception to this rule. They reserve the program for those buyers that otherwise would be unable to have an adequate place to live that they can call their own.
