USDA Explains What’s an Acceptable Outbuilding

Finally, USDA has given us some rules about what outbuildings they’ll accept and which ones they won’t.  If you are planning to offer USDA financing options on rural properties with outbuildings, you may want to read this to see if they are eligible.

USDA is in the business of providing financing for residential properties.  Farms, buildings intended for business or commercial use or income producing land does NOT qualify. 

Farm Service Buildings – Any structure used in farming operations include

·         Building to house farm workers/families

·         Buildings to house livestock, barns, shelters

·         Buildings to house machinery & equipment

·         Buildings to store crops such as gain silos

Farm Use of Land – If land has been used for farming in the past, it’s ineligible

·         Growing crops

·         Raising or breeding domestic animals

·         Other types of farming involving water (oyster, catfish or trout farms)

Related Buildings – Buildings that are allowed

·         Garages

·         Storage sheds (for personal use)

·         Basements

·         Semi-basements

·         Underground shelters

·         Summer kitchens

·         Garden sheds

·         Carports

·         Pump houses

·         Recreational structures (exercise rooms, game rooms, craft/hobby rooms)

·         Non-commercial buildings

·         Workshops

Income-Producing Properties – These types of properties are NOT eligible for financing.

·         Warehouses

·         Bed & breakfast

·         Boarding homes

·         Buildings with mechanical equipment remaining from a prior business

·         Horse riding arenas

·         Non-residential buildings – Office, commercial, storefronts with residential space

Limitations to Size of Land – USDA does not have any limit to the size/acreage of the land.  However here are some other limits.

·         The value of land should account for 30% of the total value of the property

·         Can exceed 30% if typical for area

·         Appraisal report to determine the home to land value

·         Site cannot be subdivided into two or more sites

Call me if you have questions about out buildings, income producing buildings or the value of the land so we can check with Rural Housing prior to offering USDA financing.