About USDA Home Loan Occupancy Requirements

USDA loans include occupancy requirements that specify how USDA-financed homes can be used and by whom.

The most important USDA occupancy requirement is the primary residency requirement, which says the home must be used as your primary place of living — not a second home, vacation house, or income-earning property.

USDA Primary Residency Requirement

Borrowers hoping to leverage the benefits of USDA home loans to fund an investment property will be disappointed. The USDA’s guidance on this rule is firm. USDA home loans are meant for personal use as your primary place of living and any applications indicating otherwise will be denied.

How is “primary residence” defined?

The homebuyer must show intent to live in the USDA-financed property over 50% of the time. Borrowers who intend to own more than one property, including the USDA loan-financed property, may face additional scrutiny to ensure they’re following USDA guidelines.

Homebuyers who intend to use the USDA loan program the way it was designed shouldn’t have anything to worry about. USDA loan specialists guide borrowers through the process and will let each person know what documents are required for USDA underwriting.

Who is allowed to live in the home?

The USDA doesn't have any specific requirements regarding who can live in the home. However, USDA loans are intended to help homebuyers finance their primary residence and not an income-producing property.

USDA Loan Cosigners and Co-Borrowers

USDA loans can also include co-borrowers or co-applicants who intend to live in the home and share ownership of the property. USDA loan co-borrowers can help a primary borrower qualify for a loan, especially if they do not meet the income or credit qualifications on their own.

USDA loan co-borrower requirements are generally the same as those for primary borrowers. Notably, co-borrowers must use the home as their primary residence. As USDA home loans are intended to provide affordable housing options, non-occupants are not allowed to have a stake in the ownership of a home financed with a USDA home loan.

Can you have a non-occupant co-signer on a USDA loan?

The USDA does not allow non-occupant co-signers. Co-signers assume responsibility for the repayment of a loan in the event the primary borrower gets behind on payments, but do not have any ownership interest in the property. Therefore, they cannot be considered as occupants and cannot qualify for a USDA loan. If you’re considering using a non-occupant to qualify for a mortgage, you’ll need to consider an FHA or conventional loan instead.

Why do borrowers need to move in within 60 days of closing?

To fulfill minimum USDA loan occupancy requirements, borrowers must move into the property within 60 days of purchase, making it their full-time residence. Some exceptions are allowed.

For example, active duty service members’ families can occupy the property in their place, assuming the military member intends to move into the property as soon as they’ve been discharged.

This requirement can be seen as a deadline to abide by the basic primary residence requirement set by the USDA.