For homeowners who have obtained a USDA loan to purchase their property, it is common to wonder if they can rent out their home. Renting out your USDA loan home can be a viable option under certain circumstances. However, there are some important factors to consider before deciding to rent out your property. In this article, we will explore the guidelines and requirements set by the USDA for renting out a home purchased through a USDA loan.
Eligibility Requirements
In order to determine whether you can rent out your USDA loan home, you need to consider the eligibility requirements imposed by the USDA. These requirements include:
- The home must be your primary residence: According to USDA guidelines, the property financed with a USDA loan should be occupied by the borrower as their primary residence. This means that you need to live in the home for the majority of the year.
- Temporary absences: The USDA allows for temporary absences from the property due to reasons such as work or personal matters. However, these absences should not exceed a total of 12 months. If you plan to be away from your home for an extended period, you may need to seek approval from the USDA.
- Intent to occupy the home: When you initially applied for the USDA loan, you were required to certify that you intended to occupy the property as your primary residence. Renting out the home without fulfilling this initial intent may violate the USDA loan terms.
Exceptions for Rentals
The USDA does make certain exceptions that may allow you to rent out your USDA loan home. These exceptions include:
- Change in employment: If you obtain a new job or experience a job transfer that necessitates a change in your primary residence, you may be eligible to rent out your USDA loan home.
- Unforeseen circumstances: The USDA recognizes that unexpected life events may occur, such as serious illness or the need to care for a family member, which can require a change in residency. In such cases, renting out the home may be permitted.
- Divorce or separation: If you are going through a divorce or separation and can no longer occupy the home, the USDA may allow you to rent it out.
Consulting the USDA
If you believe you may meet one of the exceptions outlined above or have other extenuating circumstances, it is essential to consult with the USDA directly. They will be able to clarify their specific requirements, provide guidance, and potentially grant permission for you to rent out your USDA loan home.
Consequences of Violating USDA Guidelines
It is important to adhere to USDA guidelines regarding primary residence occupancy and rental restrictions. Failing to do so can have serious consequences, including:
- Loan default: Renting out your home without meeting the USDA loan requirements may lead to a loan default. This can result in the acceleration of your loan balance, making the full amount due immediately.
- Recapture tax: If you violate the terms of your USDA loan and decide to sell the property, you may be subject to a recapture tax. The recapture tax is a portion of the subsidy you received from the USDA that needs to be repaid.
Conclusion
While it may be possible to rent out your USDA loan home under certain circumstances, it is crucial to understand and abide by the USDA’s guidelines and requirements. Failing to do so can result in severe consequences, including loan default and recapture tax. If you have any doubts or are considering renting out your USDA loan home, it is advisable to consult with the USDA directly to ensure compliance and protect your investment.