USDA Investment Loans Exist, Sort Of

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USDA Investment Loans?

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If by USDA investment loans you mean loans on a property from which you can run a business, USDA investment loans exist. If you mean a 2-4 unit property that has a commercial unit they do not.  They do not exists to if you mean a property with structures whose primary function is to produce income.

One of the things the USDA does is help people who earn less than their area’s average income to own a home. By “home” USDA means a detached, single-family house with access to the road that is safe and structurally sound. (Yes, no condos, no 2-4 unit apartment or mixed-use buildings.)

USDA investment loans

So, a property can have structures that were used for commercial purposes if they are now storage buildings.

Properties are also acceptable if the owners are going to run businesses that do not require commercial features.

You can run a day care, gardening and selling products or making and selling arts and crafts items are allowed. If, that is, the income from them is minimal. And as long as the borrower occupies the property as principal residence.

Alternatives to USDA Investment Loans

If you want to buy an investment property in an area where USDA loans are available, you must either find a property that meets FHA loan requirements or one that meets conventional loan requirements.

A reminder, FHA requires that at least one borrower must occupy the property as their primary residence.

They are even more restrictive when it comes to 3 and 4-unit buildings: the self-sufficiency rule.  That rule requires that market rents be high enough to cover all housing expenses. Housing expenses, remember, are principal, interest mortgage insurance, homeowners association fees, any property insurance required.

 

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