When Can I Sell My USDA Loan Home?

USDA loans include occupancy requirements that specify how USDA-financed homes can be used and by whom.

The most important USDA occupancy requirement is the primary residency requirement, which says the home must be used as your primary place of living — not a second home, vacation house, or income-earning property.

Individual scenarios can make determining eligibility a bit murky, so let’s break these rules down a bit.

If you purchased your home with a USDA loan, you may be wondering if there are any restrictions on when you can sell the property. The good news is that USDA loans do not have any requirements for how long you must live in the home before selling it. You can sell your USDA-financed property at any time without penalty.

No Minimum Occupancy Period

Unlike some other government-backed loans like FHA, the USDA rural housing program does not impose a minimum occupancy period before you can sell. For example, with an FHA loan, you typically need to live in the home for at least 12 months before selling, or you may face a partial refund of your upfront mortgage insurance premium to FHA.

But with a USDA rural development loan, there is no minimum occupancy requirement at all. You can move and sell your USDA home right away if needed, without any ramifications.

No Prepayment Penalties

Additionally, USDA loans do not have any prepayment penalties or fees if you pay off your loan early. You can sell your home and pay off your USDA mortgage whenever you want without owing an early repayment fee.

This differs from some other types of mortgages like an adjustable-rate mortgage (ARM) that may charge you a penalty of several months’ worth of interest if you refinance or sell the home during the first few years of the loan But with a USDA loan, there are never any prepayment penalties no matter when you sell.

Keep Your Home Sale Proceeds

When you sell your home, you also get to keep all of the profits just like with a conventional loan For example, if your home appreciated in value and you make a $50,000 profit when selling, those proceeds are all yours to keep

The USDA rural housing program does not take a cut of your home sale proceeds or equity when you sell. You can use the profits to put towards your next home purchase or for any other purpose.

Use USDA Again For Your Next Home

Another benefit of the USDA program is that you can qualify and use it again in the future when you purchase your next home, provided you still meet the eligibility criteria. USDA financing is not just for first-time homebuyers.

To qualify for a new USDA loan, your income must still fall under the limit for your area, and you’ll need to meet the credit score and debt-to-income requirements. As long as you still meet the guidelines, you can utilize the USDA rural housing loan benefit for multiple home purchases over your lifetime if desired.

Tips When Selling a USDA Home

If you plan to sell your USDA-financed home, here are some tips to make the process go smoothly:

Review your loan documents – Make sure you understand any specifics about your particular USDA mortgage. For example, if seller concessions were used to pay your closing costs, you may need to repay those if you sell within 3 years.
Consider refinancing first – If current interest rates are lower than your existing USDA loan rate, refinancing to a lower rate before selling can increase your home’s resale value. Shop around to see if it makes sense to refi.
Consult a real estate agent – They can help you determine the optimal listing price and market your home effectively to sell it quicker. A good agent is key.
Remove clutter and make repairs – Make minor fixes and declutter so your home shows well. Make it look attractive to buyers.
Provide paperwork for closing – Have documents like the deed, survey, HOA info ready to speed up the closing process when you get an offer.

The Bottom Line

Unlike other mortgages, USDA home loans do not penalize you for selling your home early on or charge you fees for doing so. You can sell and move as needed without worry. Just make sure your loan is in good standing, and work with a good real estate agent to market the property.

With no occupancy period requirements, no prepayment penalties, and ability to keep your full profits, the USDA 502 program provides homebuyers the flexibility they need. If considering the USDA mortgage option, rest assured you won’t face any hassles or drawbacks when it comes time to eventually sell your home.

Who is allowed to live in the home?

The USDA doesnt have any specific requirements regarding who can live in the home. However, USDA loans are intended to help homebuyers finance their primary residence and not an income-producing property.

Why do borrowers need to move in within 60 days of closing?

To fulfill minimum USDA loan occupancy requirements, borrowers must move into the property within 60 days of purchase, making it their full-time residence. Some exceptions are allowed.

For example, active duty service members’ families can occupy the property in their place, assuming the military member intends to move into the property as soon as they’ve been discharged.

This requirement can be seen as a deadline to abide by the basic primary residence requirement set by the USDA.

Buying a House Using USDA Rural Development Loan ($1,000 DOWN)

FAQ

How to avoid USDA subsidy recapture?

– If a borrower pays their loan in full and continues to occupy the property, subsidy recapture can be deferred until they move or transfer the property title to someone else.

Does USDA have a 90 day flip rule?

Appraisal Updates • An appraisal report is initially valid for 150 days from the effective date • Lenders may extend that period to 240 days (an extra 90 days beyond the initial period) with a one-time Appraisal Update Report. Property flipping is not prohibited.

What happens to my USDA loan if my income changes?

Can our payment change? Annually, the amount paid by you and Rural Development is reviewed. Your payments can change based on changes in your total household income. Usually, if your income increases, your mortgage payments will increase.

Can my girlfriend live with me if I have an USDA loan?

USDA Loan Occupancy Requirements First and foremost, your USDA-financed property must be your primary residence. You also need to intend to move into the home within 60 days of your loan closing. A few other stipulations: Only the USDA borrower and their immediate family members can reside on the property.

Do you need a USDA loan to buy a home?

The homebuyer must show intent to live in the USDA-financed property over 50% of the time. Borrowers who intend to own more than one property, including the USDA loan-financed property, may face additional scrutiny to ensure they’re following USDA guidelines.

How long do you have to live in a house with a USDA loan?

You must move into the home within 60 days of closing and make it your primary residence. After that, you need to stay in the home for at least 12 months before you can rent it out or allow a non-family member to live in the home full-time.

How do you sell a house with a USDA loan?

First, the most common way is to negotiate your contract to have the home seller pay your closing cost. USDA Rural Development will permit the seller to pay up to 6% of the buyer’s USDA closing costs and prepaid escrow items. Another option is to roll your closing into your loan given the appraised value is high enough to support it.

What are the requirements for a USDA loan?

USDA loans include occupancy requirements that specify how USDA-financed homes can be used and by whom. The most important USDA occupancy requirement is the primary residency requirement, which says the home must be used as your primary place of living — not a second home, vacation house, or income-earning property.