USDA Home Loans?

Has anyone bought their homestead with a USDA Home Loan?  Tell me about it?
I guess my biggest question would be whether some of the viable properties would be in the suburbs rather than ultra rural?  I have to use public transit so no far-out-rural life for me.  Additionally how does one know whether a property is a candidate?  I've heard they can go as low as 1 percent down?  We don't have enough money for a usual down payment which is why I'm just trying to learn about this.  Also is there a way to get further in the home-buying process by aiming for a homestead, like specifically calling it that, I know there are tax excemptions etc. when property is declared a homestead.  

In our case we don't need anything huge, we want to:
Grow fruits/veg./flowers/etc.
Rent out extra spaces like garages, it would be great if it were a duplex so we could rent the other side out.
Do a home business situation where I could sell vintage goods, and maybe some sort of food so it would fall under "farm stand" that way it will be allowed more easily, or get something that is zoned residential/commercial.
Hopefully plop a friend's tiny house on the property and they can pay us srent for the space.
And mason bees of course.
And maybe a blacksmithing forge, as my husband is learning.


I know its all a tall order and likely wishful thinking, but knowledge is power.  Probably a quarter acre/half acre would be sufficient.

Hi Riona,
While I have not bought a house using a USDA Rural Home Loan, I was surprised by what they considered rural. Here is a link to a map showing eligibility. Obviously double check with a local rep to be sure, but it gives you an idea. It also has the other info on income eligibility and whatnot.

https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfhprev

Here is a previous discussion that might help:

https://permies.com/t/213135/experience-knowledge-USDA-loans

Hi Matt,

Indeed. I know of a building in the Atlanta area was was built with a USDA loan.  The building, in my view, was certainly not for ag purposes, and the location it was in was anything but rural by my standards.  The explanation I got, this was maybe 20 years ago, was the the USDA was working off of 1950s era maps.  

I looked into them several years ago when I bought my farm and it had some issues.

What makes them awesome is also what makes them bad. They only care that your credit score is low, because that is the whole purpose of them, to get good people into farms that otherwise couldn't. By their very bylaws they are not allowed to take money (interest) from banks and lending institutions. If people can get loans through them, they should instead of being funded by taxpayer monies.

If it seems ideal reading that, and that there must be a catch, well there isn't which ironically becomes the catch? HUH?

Because its such a good deal, MANY people try and get them. Because of limited government funding the wait list is LONG! In our case it would have been three years. Let me ask you this, what landowner is going to agree to sell you their farm then wait THREE YEARS? So that is the real problem, no seller is going to wait that long for a buyer to go through that long process. In our case we ended up going with a finance company that works with the Small Business Administration, but also charged high interest for the loan.

I have never got a loan through them for a house and less acreage though, and probably never would. The government can be good to get loans through, but they also require a LOT more paperwork and requirements. This almost never works for the seller. I buy and sell a lot of property, just as an example, this year I bought and sold five houses. I NEVER even consider a USDA loan for any house I sell. In fact I tell my realtors to not even consider them, to not even tell me if one comes across as potentially being a buyer. The inspections are way too involved, they test the property for things that do not matter, and the lead time is long and arduous for a loan. While it stops some potential sales, in my experience it also stops a lot of frustration. While it takes awhile to find the right cash buyer, ultimately its the same time spent as waiting for an approved USDA home loan to go through, so I just wait. As a buyer with a USDA loan, you are going to run into a lot of sellers like me. When you sell you are asked right up front, "will you consider USDA loans?" Most realtors discourage sellers from even accepting offers from them because they are painful for them too.

This becomes a problem because available houses to buy are quite low in quantity If you get a USDA loan you can figure about 3/4 of those very few houses are going to accept offers from those getting USDA loans. That is very few houses to pick from. Then we are living in an era where houses are moving fast. The last house I bought we looked at on December 26 and bought it December 30... four days! Sellers today expect to sell their houses in days, not months, and they have too, to get a house for themselves to move into. they too have to be able to move fast.

I did get an farm operational loan from the USDA though and was approved in very short time. It worked good because we only had to pay low interest once per year instead of paying interest and principal in monthly payments. We ended up paying it completely off in 2 years though which worked out good for us. I would recommend those types of loans from the USDA but a USDA loan for a house or farm might be a let-down.

Buyers can use USDA loans to their advantage though.

One thing I look for is houses that have been on the market for over 60 days. That is kind of the line in the sand that tells you if a house is sellable or not. If an occupied house is over that 60 days, it most likely was a USDA loan that fell through. This means the seller is most likely despondent that a sale fell through, and highly motivated to sell the house. As a buyer you can search these houses out, and then put in a low offer for the home.

Once the offer is accepted, it is in your best interest to get a very reputable home inspector and do a thorough inspection of the place to figure out why the house did not pass the previous inspection. It might be as simple as some electrical work that needs to be done, or more often, septic work. It then becomes up to you if the house is worth moving forward on, but at least by then you are locked into a price. I say septic work because that is a test requirement of a USDA loan that most other lenders do not require.

One house I will not even consider though.... is a house with a drooped roofline. That tells me the foundation is bad and the house is not repairable. It is just a fast, intelligent way to weed out problems when buying low value houses.

Thanks all for the info, I'm about to go click on that map/eligability chart.

There are other issues besides finance.
- soil quality
- flooding
- orientation
- access
- fencing
- shedding
- water supply
- septic
- roofing