Do USDA Home Loans Allow for Swimming Pools, Fixer Uppers, or Even Barns? The New Rules Explained

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Homebuyers daunted by the idea of amassing a huge down payment for a mortgage might be surprised (and relieved) to know that not all home loans set such a high bar. If you’re shopping in rural areas outside of cities, a USDA loan can help you buy a house with $0 down and lower-than-average interest rates, too.

USDA loans are offered by the United States Department of Agriculture, in an effort to help lower-income homebuyers afford a house. While these loans come with many cash-saving benefits, the catch is they also come with more rules than a typical home loan.

The biggest restriction for USDA loans is that the home must be in certain, more remote areas and be “modest” in size (no mansions allowed).

“The general USDA standards for eligible properties include being located in a rural area and having a living area typically between 400 and 2,000 square feet,” says Jill Gonzalez, an analyst for WalletHub.

But beyond that, homebuyers might have plenty of additional questions. Here are some to be aware of, to help you decide whether a USDA loan is right for you.

Can you have a swimming pool with a USDA loan?

In the past, the USDA handbook stated that in-ground swimming pools were not allowed. Yet in 2022, the USDA amended their handbook, so that homes with existing, in-ground swimming pools can be purchased using USDA loan money.

“In-ground pools can be financed for existing real estate only, per USDA guidelines, provided the home meets the other modest dwelling requirements, and the pool has been inspected by a qualified inspector,” says Harold Moore, a mortgage loan officer in Ft. Worth, TX.  “However, in-ground pools are still prohibited with new construction properties that are purchased new.”

That said, these rules only apply to in-ground pools. USDA loans do not prohibit the addition or purchase of a home with an above-ground pool, in any way. Why? Because above-ground pools typically have little impact on the value of a property, so such features rarely push a home beyond the USDA’s “modest” threshold.

Can you finance a fixer upper with a USDA loan?

While homes eligible for USDA loans must not be too extravagant, they also can’t be falling apart. This rule will come into play if you’re considering a fixer upper.

So how much fixing up is allowed? In general, estimated renovation costs should not exceed 10% of your home loan amount. Plus, the renovations can’t be so extensive that you aren’t able to live in the house while the work is happening. The USDA also requires that renovations be completed within 180 days of closing.

These rules exist largely because USDA-eligible homes are supposed to serve as a homeowner’s primary residence, rather than as a flip or investment. As long as you’re simply fixing up a structurally sound house to make it more livable for you and your family, you’re probably fine.

Are USDA loans only for homes with farms or barns?

While many people think that applying for a USDA loan means you have to buy a farm, ironically that is exactly what you are not allowed to purchase with this type of financing.

According to the USDA’s property requirements handbook, farm service buildings such as barns, silos, livestock facilities, or greenhouses are not allowed if they’re still being used for agricultural, money-making purposes. However, if those same buildings are present but no longer used commercially, and are instead used for something like extra personal storage, they’re okay.

“You can have outbuildings such as storage sheds and noncommercial workshops are permitted if they are not used primarily for an income-producing agricultural, farming, or commercial enterprise,” says Moore, who adds, however, that guesthouses and backyard cottages are not allowed. “USDA loans are meant for personal shelter and not business use.” 

Can USDA loans be used to buy duplexes, condos, or townhomes?

According to new USDA guidelines, one unit of a duplex may be eligible for a USDA loan as long as it’s in a qualified rural area. However, the homebuyer cannot purchase both units of a duplex, because it would then be considered an income-producing property, which is absolutely not allowed.

Condos and townhomes also can qualify for USDA loans, even if they aren’t standalone houses. That said, the purchasing rules follow the same logic in that you can buy one residence but not the whole building.

“My team and I had the opportunity to work with a large, regional builder on a townhome project a few years ago, which qualified for USDA financing based on location; and over half of the homebuyers who qualified opted for USDA financing over traditional, conventional, or FHA loans,” says Tan Tunador, a senior loan officer with Atlantic Coast Mortgage in Loudon County, VA.

Are tiny houses eligible for USDA loans?

While manufactured homes are generally not eligible for USDA loans, a tiny home (typically around 400 square feet) might be approved if the USDA loan approval officer decides it meets the same property standards as other government-financed dwellings. However, tiny homes that are built on wheels or a trailer chassis (meaning they are not permanently affixed to real property) will be deemed ineligible, regardless of size.

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