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The USDA loan program is designed to provide an affordable, minimal-barrier route to homeownership for low- and middle-income earners

In order to qualify, the property must be located in a USDA-eligible area and serve as the buyer’s primary residence. The borrower must also meet certain income and credit requirements, though these tend to be less stringent than other loan programs currently available.

Because they are intended for primary residence, buyers cannot use a USDA loan for investment property.

Primary Residence Requirements

USDA loans are designed to help Americans purchase their primary residence affordably and easily 300 loan, so rental homes, vacation homes, farm buildings and other income-producing properties aren’t eligible.

Can you use a USDA for land?

That depends. Though purchasing land with the primary purpose of income would violate USDA regulations, buyers may still purchase land with income-producing features located on it. This would include things like barns, silos, livestock facilities and greenhouse, as long as they are not part of a commercial or income-producing operation. A barn used for storage or a greenhouse used to grow personal produce would be allowable under USDA rules.

DTI Restrictions

The USDA’s debt-to-income restrictions play a big role in why income-producing properties and large plots of lands aren’t eligible for these loans. Because USDA loans are designed for low- and middle-income earners, there are very specific rules for how much borrowers can spend on housing debt — and debt in general.

Because larger plots of land and income-producing properties can be more expensive, both up front and in monthly costs, they are more likely to push borrowers over these DTI guidelines and disqualify them from eligibility.

Lenders can also have concerns about a primary residence becoming intertwined with a business.

Other USDA Loan Programs

Though a traditional USDA loan isn’t an option for income-producing properties like farms or multi-family units, the U.S. Weiterlesen