USDA will not allow a property to have income producing buildings or farmland. You would think that The US Department of Agriculture would be okay with this, but they are not for their Rural Development program. Here are the USDA site requirements to consider when planning to apply for a USDA loan.

USDA Site Requirements

Sites must be modest and developed in accordance with any standards imposed by a State or local government. Therefore, the following requirements must be verified by the lender at the time of application:

• Site size: The site size must be typical for the area. (Some acreage is fine as long as it is normal and the appraisal has comparable sales with similar acreage.)
• Income-Producing Buildings: The property must not include buildings designed and to be used principally for income-producing purposes. For example barns, silos, greenhouses, or livestock facilities mainly used for income producing agricultural, farming or commercial enterprise are ineligible. However, barn, silos, livestock facilities or greenhouses no longer in use for a commercial operation, used for storage, and outbuildings such as storage sheds are permitted if they are not used primarily for income producing agricultural, farming or commercial enterprise. A minimal income-producing activity, such as maintaining a garden that generates a small amount of additional revenue, does not violate this requirement. Home-based operations such as childcare, product sales, or craft production that do not require specific features are not restricted. Qualified property must be predominantly residential in use, character, and appearance.
• Income-Producing Land: The site must not have income-producing land that will be used principally for income producing purposes. Vacant land or properties used primarily for agricultural, farming or commercial enterprise are ineligible. Sites that have income-producing characteristics (e.g., large tracts of arable land ready for planting) are considered income-producing property.  However, maintaining a garden for personal use is not in violation of this requirement. A minimal income-producing activity, such as a garden that could generate a small amount of additional income does not violate this requirement. Qualified property must be predominantly residential in use, character, and appearance.
• Site Specifications: The site must be contiguous to and have direct access from a street, road, or driveway. Streets and roads must be hard surfaced or all-weather surfaced, and legally enforceable arrangements must be in place to ensure that needed maintenance will be provided.
• Utilities: The site must have adequate utilities, water, and wastewater disposal systems.

If you have questions about using a USDA home loan to purchase a home, we’re happy to help.

By OVM Financial Mortgage Writer/Blogger