New USDA Loans when you already own a home

USDA Rural Development Home Loan Primary Residence Guidelines

The USDA Rural Development is one of our most popular home loans for buying a home in MN, WI, and SD.

USDA Rural Development LoansBecause the program is a means tested assistance program (the assistance is no down payment), it does come with a few more quirks and wrinkles compared to other mortgage loans.

The USDA Rural Loan Program may not be used for second homes or investment properties.  Only for primary residences located in eligible areas.

Technically you can only own one home at a time with a USDA loan. However, in situations where a homeowner wants to purchase a new primary residence before their current property sells, a USDA loan MAY be possible, but proceed with extreme caution as USDA loan eligibility can be confusing and frustrating!

In order to qualify for a USDA loan when your existing home is not sold, the loan will have to be approved by both underwriting and USDA Rural Development (RD) to have met their property superiority condition which could be anyone of the following:

  • Upgrading from a manufactured home (mobile home) to a single family residence. (Restrictions apply)
  • Increase in family size which now requiring a larger home because the current home is now too small
  • Current residence is outside of a reasonable commuting distance due to employment change, relocation, etc.
  • Provided the reason is acceptable and makes sense, the home buyer then must still be able to qualify for BOTH house payments, taxes, lot rent, etc. because the existing house has not yet sold.

Upfront work and communication at the beginning with an experienced USDA Loan Officer is critical between all parties to determine if this could be considered an eligible situation for you.

For your personal scenarios, click here to get pre-qualified for a MN, WI, or SD USDA mortgage today, or call me directly at (651) 552-3681.  Note, we lend in MN, WI, and SD only.


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