When purchasing a home using FHA, USDA, or VA loans, not every property qualifies under their government-backed lending rules. “Ineligible property types” are properties that do not meet these agencies’ criteria, which focus on safety, habitability, and suitability as a primary residence.
Why These Agencies Set Property Standards
The FHA, USDA, and VA provide loan insurance or guarantees to lenders, reducing lender risk and helping eligible borrowers access financing. Their property rules ensure the home is structurally sound, safe, and appropriate as a long-term residence, thereby protecting both the borrower and taxpayers.
Key Reasons Properties May Be Ineligible
Across all three programs, common disqualifying factors include:
- Health and safety hazards: Issues like exposed wiring, foundation problems, contaminated water, or mold.
- Incomplete construction: Properties must be finished and ready for immediate occupancy.
- Commercial use: Significant portions used for business purposes generally disqualify the property.
- Non-primary residences: Investment properties or vacation homes usually do not qualify.
- Location restrictions: USDA loans require properties to be in designated rural areas; homes in floodplains without insurance may be disqualified.
Specific Guidelines by Loan Program
FHA Loans
The FHA emphasizes health and safety with strict property standards primarily for single-family homes. Typical disqualifiers include:
- Structural damage or major safety hazards (e.g., unstable foundations, faulty electrical systems)
- Presence of lead-based paint (in homes built before 1978) or mold
- Lack of basic utilities (water, electricity, heating)
- Unapproved condominiums or manufactured homes that don’t meet FHA criteria
Learn more about FHA loans in our FHA Loan guide.
USDA Loans
Designed to support rural homebuyers with modest incomes, USDA loans require the property to be:
- Located in USDA-designated rural areas (check the USDA eligibility map)
- A modest, primary residence—not a working farm or commercial property
- Safe and structurally sound with no major defects
More details can be found in our USDA Loan glossary.
VA Loans
VA loans assist eligible veterans and require properties to meet Minimum Property Requirements (MPRs), including:
- Safe and sanitary living conditions without hazardous materials
- Direct access to public roads and functioning utilities
- No significant structural issues (e.g., termite damage, roof leaks)
- Restrictions on co-ops, hotels, or properties primarily for business use
Visit our VA Loan guide for comprehensive information.
Practical Tips for Homebuyers and Sellers
- Buyers: Consult your lender early if the property has unique features or appears to need repairs. A pre-inspection can reveal potential hurdles.
- Sellers: Address critical health and safety issues before listing, especially if targeting buyers using government-backed loans.
Understanding these property eligibility standards helps streamline loan approval and avoids surprises during the homebuying process.
Authoritative Sources for Further Reading
- FHA Single Family Housing Policy Handbook 4000.1 HUD.gov
- USDA Single Family Housing Guaranteed Loan Program USDA.gov
- VA Lender’s Handbook, Chapter 12 on MPRs VA.gov PDF
For related topics, see our articles on Engineering Certification (HUD/FHA Loans) and Deferred Maintenance Impact on Loan.