USDA Loan Boundaries to Change

USDA Loan Boundaries to Change October 1, 2013

One of the best mortgage products available today is the USDA home loan. It allows borrowers to purchase a home with zero down, as long as the home is within a “rural” geographical area as designated by USDA.

USDA is a little different than other government-backed programs like FHA and VA, in that the first thing the lender will review is the location of the property.

Even if the borrowers are fully qualified from an income and credit perspective, the USDA loan cannot be approved if the property is not located in an eligible area. And these eligible geographic areas are about to change.

Property Eligibility
Programs
Single Family Housing
Multi Family Housing
Business Programs
Satellite Grant Program
Water & Environmental

Future Eligible Areas
Programs
Single Family Housing
Multi Family Housing

Income Eligibility
Programs
Single Family Housing

Income Limits
Single Family Housing
Direct
Guaranteed

USDA Eligible Areas are tied to Census.

The United States conducts a census every 10 years. The 2010 census revealed changes to population that will make some areas ineligible for USDA financing.

Many people have move away from sparsely populated areas and closer to cities and suburbs since 2000, when the last census was taken. Because of this trend, many areas will exceed population limits set by USDA, becoming ineligible. The boundaries for USDA loans will change as of October 1, 2013, unless Congress extends this date.

Upcoming Changes

A recent analysis performed by the Housing Assistance Council in 2011 indicated that with the new population count, as many as many as 500 geographical areas currently eligible for USDA financing will no longer be, based upon the results of the census. According to the report, more than 10,000 square miles of currently eligible area will be removed from USDA loan eligibility.

The data indicated that as of 2009, about 34 percent of the US population resided in USDA eligible areas. After the boundaries are changed, the population within USDA-eligible territory will decrease by about eight percent, to 26 percent of the population.

There are about 9.1 million people who live in areas that will no longer be eligible for USDA financing.

That’s quite a decrease, realizing how big a help USDA financing has been to many people. Besides VA, USDA is the only zero down mortgage program available today.

Current and Future USDA Eligibility Map

The future eligibility map is available on USDA’s website. Simply type in the property address or browse your area on the map to see if a potential property will be eligible after September 30, 2013.

To see USDA-eligible areas as of April 17, 2013, visit USDA’s current eligibility map.

Toggling between the map as of April 17, 2013 and the future eligibility map effective after September 30th, you can see that there are significant changes around Seattle, Washington, and also Dallas, Texas, and Las Vegas, Nevada. If you live in or around the suburbs of a major metropolitan area, it’s likely that your area will no longer be USDA eligible.

Questions and Answers about USDA Boundaries

What is the absolute latest date for the existing boundaries? When changes like this one are implemented, usually the USDA office in your jurisdiction must accept your loan prior to the date of the change. For the USDA to receive your loan on time, it must go through processing and underwriting at your lender, who then sends it to USDA. In short, if you find a home that will become ineligible due to the change, you should apply with your lender 30-45 days prior to September 30, 2013. There will most likely be backups in USDA offices due to borrowers trying to purchase homes before the cutoff.

My home looks like it won’t be in an approved area after the boundary changes take effect. Can I refinance my USDA loan after that date? Yes. As long as you have a USDA loan and meet other USDA refinance qualifications, you can refinance even though you are no longer in a USDA-eligible area.

Do all lenders follow the same USDA boundaries? All USDA loans underwritten by authorized USDA lenders must follow all underwriting guidelines, including eligible property boundaries.

Does the property have to be in an eligible area if I apply directly with the USDA for my loan? Yes, regardless of where you obtain your USDA loan, property location is required to be in an eligible area.

Can the boundaries change after September 30 yet again? Boundary changes are established using official census information and will not change until after the next census is reviewed, after 2020.