As of October 1, 2013, all USDA loan applications need to have been submitted to the appropriate Rural Development (RD) office to be eligible for pre-October 1 boundaries. All incomplete files and any application submitted after the cutoff are subject to USDA’s new home loan boundaries.
If you had applied to buy a home within former USDA boundaries, but your lender has not yet submitted your application to your local RD office, you will need to find another home within new boundaries, or apply for a different type of home loan.
If USDA received your file from your lender prior to October 1, but it is not yet approved due to backlogs, it will be reviewed according to pre-October 1 USDA boundaries. Only USDA-approved lenders can submit a file to the appropriate RD office.
Contact a knowledgeable USDA loan officer to get your questions answered about the USDA home loan and recent changes.
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 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 changed as of October 1, 2013.
2013 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 as of 2009, about 34 percent of the US population resided in USDA eligible areas. Now that the boundaries have changed, the population within USDA-eligible territory decreased by about eight percent, to 26 percent of the population.
There are about 9.1 million people who live in formerly USDA-eligible areas, who are no longer able to obtain USDA financing unless they find a home within the new boundaries.
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
The future eligibility map reveals 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. Be sure to check the future eligibility map, which reflects current boundaries, before you make an offer to buy a home using USDA financing.
- Pre October 1 USDA-eligible areas covered 97% of the nation’s land mass
- There were 109 million people living within former USDA-eligible areas
- The new USDA boundaries only reduce eligible land mass by 0.3%, but this land mass represents 8% of the population.
Q&A about USDA Geographical Boundaries
What is the absolute latest date for the existing boundaries? According to this USDA Origination Update, your loan file must have been submitted to your area’s Rural Development office by end-of-business on September 30, 2013. 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 received your file in time, it will still be processed per the pre-October 1 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, 2013 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 designations of what can be considered rural. Over 9 million people will no longer be living in an eligible area after September 30, 2013, so apply for your USDA loan here.
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.