fbpx Skip to content

USDA Renovation Loan: Requirements

Reviewed by: David Naimey

Approved by: Chad Turner

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.


Written by: