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USDA loans · 7 CFR part 3555USDA loan rules: seller concessions, financed closing costs and what the property must be

USDA guaranteed loans (7 CFR part 3555) finance a home the buyer will use as a principal residence. Besides the price, the loan can pay reasonable and customary costs of getting the loan – legal fees, title exam and title insurance, transfer taxes and recording fees, appraisal, inspection and survey, homebuyer education, reasonable discount points, the lender's customary closing costs, prorated taxes due at closing and escrow deposits, and the up-front guarantee fee – but any cost the seller or another party pays can't also be put in the loan. The loan may not exceed the lesser of the appraised market value plus the up-front guarantee fee, or the price plus eligible costs. A guarantee won't be issued if the seller or another interested party contributes more than 6% of the price toward the buyer's financing costs, closing costs, escrow accounts, furniture or other giveaways, or if loan funds set up a buydown account or buy income-producing land or buildings. The site must be typical in size for the area, not used principally for income or agriculture, reached directly from a hard-surfaced or all-weather road with enforceable maintenance arrangements, and served by adequate utilities, water and wastewater systems. An existing home must be structurally sound, functionally adequate, in good repair (or repaired with loan funds) and have safe electrical, heating, plumbing, water and wastewater systems. If only exterior or interior development work is unfinished, the loan can close with an escrow of at least 100% of the cost if the work doesn't affect habitability, costs no more than 10% of the loan, and is under contract to be finished within 180 days.

Money rules (3555.101–3555.103)

  1. Seller concessions

    Up to 6% of the price toward financing costs, closing costs, escrows, furniture or giveaways.

  2. Closing costs in the loan

    Reasonable and customary costs, prorated taxes, escrow deposits and the guarantee fee can be financed.

  3. Loan limit

    The lesser of appraised value plus the up-front guarantee fee, or price plus eligible costs.

  4. No double counting

    Costs paid by the seller or a third party can't be included in the loan.

  5. Not allowed

    A buydown account; income-producing land or buildings.

Site and dwelling (3555.201–3555.202)

  1. Site

    Typical size for the area; not mainly income-producing or agricultural.

  2. Access

    Direct from a hard-surfaced or all-weather road with enforceable maintenance.

  3. Utilities

    Adequate utilities, water and wastewater; private systems if adequate, safe and connecting isn't reasonable.

  4. Existing home

    Structurally sound, functionally adequate, in good repair, safe systems.

  5. Unfinished work

    Escrow ≥100% of cost, ≤10% of the loan, finished within 180 days, habitability not affected.

What the TC can do

  • Check that seller contributions in the contract stay within 6% of the price.
  • For a private well, septic or private road, ask the lender early what inspections or agreements it needs.
  • If exterior work will be unfinished at closing, get the contractor's completion contract to the lender.

Questions buyers ask

How much can a seller pay on a USDA loan?

Up to 6% of the sales price toward the buyer's financing costs, closing costs, escrow accounts, furniture or other giveaways, unless the agency provides otherwise (7 CFR 3555.102).

Can closing costs be financed in a USDA loan?

Yes. Reasonable and customary closing costs, prorated taxes, escrow deposits and the up-front guarantee fee can be included, up to the appraised value plus the guarantee fee (7 CFR 3555.101, 3555.103).

Can I buy a farm or a house with income-producing land with a USDA loan?

No. The site can't include land or buildings used principally for income-producing purposes, and property used primarily for agriculture or a commercial enterprise is ineligible.

Related guides

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Source: 7 CFR 3555.101, 3555.102, 3555.103, 3555.201 and 3555.202 (eCFR, read October 26, 2026).

General information, not legal or financial advice. The lender and Rural Development decide. ClosingCode is software; it is not a lender. This guide is not a substitute for the advice or services of an attorney.