fbpx Skip to content

USDA Renovation Loan: Home Improvement Loan Requirements

Created on: April 25, 2019,

Updated on: August 24, 2024

Reviewed by David Naimey

Approved by Chad Turner

Key Takeaways

  • USDA renovation loans allow purchasing homes needing repairs in eligible locations.
  • Costs of repairs can be rolled into the mortgage, potentially saving money compared to buying turnkey homes.
  • Instant equity potential by upgrading features like kitchens or bathrooms before purchase.
  • Limited (up to $35,000 for minor repairs).
  • Full (covers extensive renovations).
Loan officer explaining the Requirements for the USDA Renovation Loan
Table of Contents
    Add a header to begin generating the table of contents

    USDA Renovation Loans

    If you’re thinking about purchasing a new home through the USDA loan program, you may have other options! While you can easily just buy a home that is not in need of any repairs, the USDA Renovation Loan Program allows you to add a few more possibilities for purchasing homes, as long as they are in an eligible rural location. Unlike other loan programs, the USDA has an eligibility criteria for homes based on location. The USDA Loan Program, however, allows lower income borrowers the flexibility to add more possible homes to their shopping list, all while keeping them very affordable.

    USDA Renovation Loan Advantages: The Loan is Government Guaranteed!

    Purchasing a fixer upper home through the USDA Renovation Loan Program offers plenty of benefits. One of the main benefits is the fact that the USDA Renovation Loan Program will roll in the costs of repair in the home being purchased, and that these renovations must be made before the sale of the home is finalized at the closing table. Because the USDA Renovation Loan Program is a government backed loan, these homes must also pass sanitary and safety regulations set by the U.S. Department of Agriculture in the most recent HUD Handbook before the home can be sold. This guarantees that you will be receiving a home with all the required work done prior to purchase and will also have a fully renovated and safe place to start a new life with your family.

    The USDA Renovation Loan Program Will Save You Money!

    Another benefit to choosing the USDA loan and purchasing a home that needs renovations is the fact that the costs of repair are rolled into the mortgage. While this initially sounds like it would cost more money, the initial purchase price of homes that need repair are usually much lower than turnkey homes on the market. This is because the owner is willing to sell the home “as is,” while not wishing to be responsible for any repairs that are needed. Luckily, the repairs can be remedied while the additional costs are being rolled into the mortgage, resulting in a cost-efficient way to upgrade either a kitchen, bathroom, or patio!

    Put Money Into Your Pocket With Instant Equity!

    Did you know that upgrading your kitchen, bathroom, or any other living space can increase the value of your home? By upgrading these features, you are instantly adding appreciation to your home before you even purchase it. This would be a very cost efficient way to get the most out of a possible cash-out refinance later on down the road, putting even more money back into your pocket upon completing an appraisal to determine your home’s new value. Alternatively, if you’re looking to eventually purchase a new house altogether, selling your previous home that now has additional features and upgrades will increase the selling price as well. Not only do you save money by choosing to purchase your home with a USDA renovation loan, but you also make money in equity after the renovations are completed! And even more, you are paying yourself to upgrade your home while also giving it your own personal flair!

    Types Of USDA Renovation Loans

    USDA provides two types of renovation loans – Limited and Full.

    Both let you roll the purchase price, home repairs, and remodeling costs into one loan, but, the extent of repairs can differ.

    Limited USDA Renovation Loans

    The Limited USDA Renovation home loan offers swift access to funds for minor repairs and improvements with a maximum repair limit of $35,000. Eligible repairs and upgrades include roofing, gutters, downspouts, existing HVAC systems, plumbing, electrical systems, flooring, minor remodeling, interior and exterior painting, and weatherization Major or extensive repairs and remodeling, such as new construction or landscaping, are not covered under this program.

    Full USDA Renovation Loans

    The Full USDA Renovation loan has no minimum or maximum renovation amount, but loan limits align with FHFA’s conforming loan limits. Unlike the Limited USDA Renovation loan, it requires a HUD consultant for property inspection, repair consultation, cost estimation, project management, and work write-up. 

    Repairs cover all Limited USDA options, plus structural alterations, garage rehabilitation, kitchen and bathroom modernization, health and safety hazard removal, aesthetic changes, well or septic system installation, and handicap accessibility improvements. However, new construction or landscaping projects are not covered.

    USDA Loan Calculator

    Facebook
    Email
    LinkedIn

    Written by:

    Related Articles

    USDA Home Loan Wisconsin

    If life in a rural setting of Wisconsin suits your life expectations, then you could apply for a USDA loan in Wisconsin and benefit from friendly terms and favorable lending requirements. Society Mortgage is an…

    USDA First Time Home Buyer (2025)

    USDA loans are a great way for first-time homebuyers to access the property ladder. These loans, backed by a government agency, come with no down payment, which is particularly helpful for buyers who don’t have…

    USDA Loans in North Carolina

    USDA loans in North Carolina are an affordable way to access homeownership on favorable terms. People on low to moderate incomes may qualify for USDA loans to buy homes in rural areas with no cash…