Can You Qualify for a USDA Loan If You Already Own a Home?

Do you need to sell your house in order
to qualify for a USDA Loan? 

Can you qualify for a USDA loan if you already own a home? This is a common question, and while this scenario can be possible, additional USDA qualifying guidelines will apply.

USDA Primary Residence Guidelines 

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

However, in situations where a homeowner wants to purchase a new primary residence before their current property sells, a USDA loan can help, but proceed with caution as USDA loan eligibility can be confusing and frustrating!

In order to qualify for a USDA loan with this scenario, 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 to a single family residence. (Restrictions do apply on this scenario, so contact my office for more details.)

• Increase in family size requiring a larger home.  For example, a 2 bedroom/1 bath home for a family of 5 may be deemed inadequate.

• Current residence is outside of a reasonable commuting distance due to employment change, relocation, etc. as determined by underwriting and USDA Rural Development.

• Provided the reason is acceptable and makes sense, the home buyer then must still be able to qualify with both housing expenses since their prior residence has not yet sold.

Upfront work and communication at the beginning is critical between all parties to determine if this could be considered an eligible situation.