USDA HB-1-3555, Chapter 12, § 12.4 — Site Requirements

USDA HB-1-3555, Chapter 12, § 12.4 — Site Requirements

Effective 2025-05-05 · USDA chapter revision · Procedure Notice 640

SITE REQUIREMENTS [7 CFR 3555.201(b)] A qualified property must be predominately residential in use, character, and design. Sites must be developed in accordance with any standards imposed by a State or local government. Therefore, the lender must verify that the following requirements are met at the time of application. x Site size. There is no specific limitation to the size/acreage of the site. The appraiser must provide an explanation in the addendum of the appraisal to explain adjustments to comparable properties, how the subject compares to other single family sites in the area, etc. x Income-Producing Buildings. The property must not include buildings principally used for income-producing purposes. Barns, silos, commercial greenhouses, or livestock facilities used primarily for the production of agricultural, farming, or commercial enterprise are ineligible. However, barns, silos, livestock facilities, or greenhouses no longer in use for a commercial operation, which will be used for storage, do not render the property ineligible. Outbuildings such as storage sheds and non-commercial workshops are permitted if they are not used primarily for an income producing, agricultural, farming, or commercial enterprise. A minimal income-producing activity, such as maintaining a garden that generates a small amount of additional income, does not violate this requirement. Home-based operations such as childcare, product sales, or craft production that do not require specific commercial real estate features are not restricted. x Accessory Dwelling Unit. An Accessory Dwelling Unit (ADU) refers to a habitable living unit, within, or detached from a single family dwelling, which together constitute a single interest in real estate. The presence of a single ADU does not automatically render the property ineligible. Design features such as converted portions of existing homes that include a kitchenette or additional attached living area (e.g., bedroom and/or bathroom) without a separate address or independent utilities (e.g., water, gas, electricity) are not restricted, provided they function in support of only the household members. ADUs which function in support of the household members, such as multigenerational households, are consistent with the objective of this program, however those designed to create a Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. potential rental income stream are not. The appraiser will determine if the ADU represents a second single family housing dwelling unit. The appraiser must document the highest and best use considering all property characteristics, including the status of the utilities if they are separate, when making this determination. The appraiser will include their evaluation in the site analysis and highest and best use section of the appraisal report, as applicable. x Income-Producing Land. The site must not have income-producing land that will be used principally for income producing purposes. Vacant land or properties used primarily for agricultural, farming, or commercial enterprise are ineligible. A residential site that houses a minimal income producing feature such as a windmill, billboard, cell phone tower, etc. located on the property does not render the site income-producing. These features are typically maintained with a legal agreement and generate a minimal amount of additional income. The lender will review the available documentation and income received in accordance with the requirements in Chapter 9 for the purpose of calculating annual household income, as applicable. x Multiple Parcels. The lender will ensure the mortgage provides a valid first lien covering each parcel. Each parcel must be conveyed in its entirety and have the same basic zoning. The entire property will contain only one dwelling but may have non-residential, non-income producing buildings, such as a garage. An improvement that has been built across lot lines is acceptable. For example, a home built across both parcels where the lot line runs under the home. Parcels divided by a road, that would otherwise be contiguous, are acceptable. x Properties with Solar Panels. Dwellings with solar panels are not considered an income producing property. If the property owner (seller) is the owner of the solar panels and the solar panels will be included as part of the purchase transaction, then standard eligibility requirements apply (i.e. appraisal, insurance, and title). If the solar panels are subject to a lease agreement, power purchase agreement (PPA), or similar type of agreement, the following requirements apply: o Leases and contracts will vary by company and should be considered on a case by case basis to ensure all terms/regulations are met. o First lien position, by the lender, should be protected and maintained. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. o The property should maintain access to an alternative source of electric/gas power that meets community standards. o The energy company or lessee should not block any foreclosure or servicing actions. o If an agreement for an energy system lease or PPA could cause restriction upon transfer of the house, the property is subject to impermissible legal restrictions and is generally ineligible for the guaranteed loan. o The lease agreement or PPA should indicate that any damage that occurs as a result of installation, malfunction, manufacturing defect, or the removal of the solar panels is the responsibility of the owner of the equipment, and the owner is obligated to repair the damage and return the improvements to their original or prior condition. o The lease agreement, PPA, or other agreement should indicate that the owner of the solar panels cannot be a loss payee on the homeowner’s insurance policy. o If a lease includes payment for equipment, it should be considered a debt and included in the total debt ratio. See Chapter 11 for additional guidance. o Leased solar panels are considered personal property and are not included in the appraised value. o Properties with Property Assessed Clean Energy (PACE) loans or assessments are ineligible for a SFHGLP loan. x Site Specifications. The site must be contiguous to and have direct access from a street, road, or driveway. Streets and roads must be hard surfaced, or all weather surfaced, with public access or permanent recorded easements. x Utilities. The site must be supported by adequate utilities and water and wastewater disposal systems. x Zoning. The property must comply with applicable zoning requirements and Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. restrictions. If an existing property does not comply with all current zoning ordinances but it is accepted by the local zoning authority, the appraiser must report the property as legal non-conforming. The appraisal must reflect any adverse effect of the legal nonconforming use on the value and marketability of the property.

Source: USDA HB-1-3555, Chapter 12, § 12.4 — Site Requirements · source URL · snapshot 0466acd1ea2d17a4