Update October 2014:
The USDA home loan eligibility map changes scheduled for October 1, 2014 have been postponed until October 1, 2015.
On September 19, 2014, the President signed into law Continuing Appropriations Resolution, 2015. This law postpones any changes to current USDA eligibility maps for the rest of the government’s fiscal year, which ends September 30, 2015. USDA eligible areas should remain unchanged for the time being, which will help rural and suburban home buyers.
This is a great opportunity to take advantage of very generous USDA loan boundaries that allow buyers in many suburban areas around the country to participate in the program. The eligible areas are based on town and city populations during the last census in the year 2000 – over 14 years ago. After October 1, 2015, USDA loan availability will be lower, especially in suburban neighborhoods.
Prospective home buyers should get pre-approved for a USDA home loan soon. Buyers need to have a complete application approved by their lender and sent to their respective state’s USDA office by end of business on September 30, 2015.
The USDA Loan
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. (See our USDA page for complete guidelines.)
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, but you can apply for a USDA loan here and ensure you are able to use USDA financing for your home purchase.
USDA Eligible Geographical Areas tied to Census
The United States conducts a census every 10 years. The 2010 census revealed changes to populations around cities and towns 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, 2015.
2015 USDA Loan 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 would no longer be eligible for USDA financing, based upon the results of the census. According to the report, more than 10,000 square miles of eligible area will be removed from USDA loan eligibility.
The data indicated that about 34 percent of the US population resided in USDA eligible areas. After the boundaries change, the population within USDA-eligible territory will decrease to about 26 percent.
That’s quite a decrease, realizing how big a help USDA financing has been to many people. Besides the VA home loan, USDA is the only zero down mortgage program available today.
Current and Future USDA Loan Eligibility Map
Up until recently, USDA featured a future eligibility map. However, they removed that and added a map for “Previously Eligible Areas”. The map of previous areas is identical to the current map because no areas have yet changed. To see current eligibility boundaries, go to USDA’s map here.
When the future eligibility maps were live, they revealed 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 could be affected when the changes take place.
- Current USDA-eligible areas cover 97% of the nation’s land mass
- There are 109 million people living within USDA-eligible areas
- About 9 million people will no longer live within USDA-eligible areas after October 1, 2015.
- New USDA boundaries will reduce eligible land mass by 0.3%; the number of USDA-eligible buyers will drop by 8%.
Q&A about USDA Geographical Boundaries
What is the absolute latest date for the existing boundaries? According to the USDA website, your loan file must be submitted to your area’s Rural Development office by end-of-business on September 30, 2015. Only a USDA-eligible lender can submit your file to USDA, usually after a preliminary review by your lender’s USDA underwriter.
If the RD office receives your file in time, it will still be processed per the pre-October 1, 2015 boundaries. But this only applies if your file is complete. Make sure your lender has submitted all necessary elements of your file to your area’s RD office in time.
If the file is incomplete or USDA did not receive the file before October 1, your application will not be approved if the home is not within current USDA eligible boundaries.
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 lenders must follow all current USDA loan 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 October 1, 2015 yet again? Boundary changes are established using official census information and will not change until after the next census is reviewed, after 2020.
Apply for a USDA Loan
Take advantage of today’s generous USDA eligible boundaries. Rates are low and homes are available in many desirable areas.
Tim Lucas (NMLS #118763), Contributor/Editor
Tim Lucas is a mortgage writer with over 11 years of experience as a loan originator, processor, and team manager. Get a live rate quote for your home purchase or refinance at MyMortgageInsider. Visit Tim on Google+ and Twitter.