An important factor for any loan, including the USDA loan is whether or not you can pay the loan back on time. This is a crucial factor, but something just as important is the site and building requirements – making sure that they meet the minimum requirements that the USDA set up. There are specific quality and value thresholds a property must meet and the borrower must be able to prove in order for USDA financing to go through.
Quality
The quality for a particular property means the quality not only of the dwelling itself, but the site as well. A few areas that USDA looks at include:
- The location of the site
- The size of the site
- The amenities provided
- The utility systems available
In terms of the dwelling, the USDA is looking for a home that is modest, since the USDA loan is for low-income families; but also a home that is safe and sanitary. The requirements are slightly different for homes that you are constructing and homes that are already in existence. The USDA is also concerned with the construction of the home, whether new construction or repairs on an existing home and the protection of the environment surrounding any activity to do with the home.
Site Requirements
The specific requirements regarding the site that your dwelling resides on include:
- The site must meet all appropriate agency requirements including the state, city, and county requirements. In addition, it must meet any particulars that pertain to the subdivision in which it lies and any zoning ordinances that are particular to that area.
- The area must be deemed rural by the USDA, which can be confirmed on their website.
- The site must be modest since the program is for low-income borrowers.
- The water and wastewater systems must meet required guidelines.
- All streets surrounding the home must also meet required guidelines.
Determining the modesty of the site is a tricky one, but is determined by the following:
- The size must not be too large, meaning that it should not be capable of being subdivided
- The value of the site cannot be more than 30 percent of the value of the home as is determined by the appraiser
- There cannot be any for-profit farm buildings on the property
Dwelling Requirements
The specific dwelling requirements for the USDA loan are as follows:
- The house itself must be modest, which means it cannot be worth more than the loan limit for the area and it must meet the square footage requirements, which means not exceeding 2,000 square feet. This square footage requirement is not set in stone; however, there are exceptions to the rule in certain areas.
- The property may not have a swimming pool.
- The property may not have any income producing areas.
- The dwelling must be able to be considered safe and sanitary.
- All systems must be fully functioning.
All properties must have a proper survey and flood certification with proof of adequate flood insurance, if it is deemed necessary. These documents must be provided to the bank prior to the closing of the USDA loan.
The general requirements for a USDA loan are simply that the house is safe, sanitary, and responsibly uses the environment’s resources to exist. No home can be excessive in size or value and it must function properly in order to secure USDA financing. The USDA and your loan officer work together to determine the eligibility of a home and the specific reasons it may not get approved under the USDA program, if it comes to that. Most homes within the rural areas determined by the USDA fall under the USDA approved guidelines, though.
