Rural Designation for DSCR Loan, Fix and Flip Loan

Last updated: September 19, 2023

If you're looking to buy an investment property and you are not sure if it's designated as rural, you've come to the right place.

How to check if a property is considered rural?

Here are the rural designation search tools that we use for our private lending platform:

• USDA Rural Development Property Eligibility
• CFPB Rural and Underserved Areas Checker
• 'Neighborhood Characteristics' section of your appraisal report
• Population

USDA Rural Development Property Eligibility

If your search result looks like this, the property is considered rural...

If your search result looks like this, the property is not considered rural...

CFPB Rural or Underserved

If your search result shows 'Yes' in the Rural or Underserved column, then it is considered rural...

If your search result shows 'No' in the Rural or Underserved column, then it is non considered rural...

Appraisal Report Marked Rural

If the 'Neighborhood Characteristics' section of your appraisal report is marked rural, we cannot fund if it is a DSCR loan. If it is a fix and flip loan, then we may be able to provide an exception and fund with reduced leverage (lower loan amount). If you believe the appraiser incorrectly marked the appraisal report as 'Rural' when it should be marked as 'Suburban', contact your OfferMarket relationship manager to submit our appraisal appeal form.

DSCR Loan Rural

At OfferMarket Capital, we cannot provide DSCR loans for properties that are designated as rural on the appraisal report. If the USDA Rural Development Eligibility is rural but the CFPB rural or underserved is not rural, then we may be able to make an exception and fund your loan.

Population Eligibility

We strongly prefer to fund transactions where the local population is 20,000+. If the population is under 10,000 then we will most likely not be able to fund your loan. We also want to make sure that the local population is not in a significant decline and trending below or already below 20,000.

Why do private lenders not lend for rural properties?

Many private lenders do not provide loans for properties that are designated rural for the following reasons:

Liquidation Risk

If the property goes into foreclosure, there is additional risk because there is a limited market of buyers in rural markets. This is as opposed to larger metro areas with denser populations and deeper pools of active buyers. The lender does not want to spend a long time with a non-performing loan and risk needing to sell below market value because there are limited buyers.

Securitization Guidelines

Many private lenders sell their loans to fixed income investors through a process known as securitization. Securitization, in this context, is the process of grouping many loans together and selling portions as an investment security to various investors through investment banks or mortgage REITs. In order for individual loans to be eligible to be included in a securitization, the loan's underlying asset (in this case residential real property) and borrower need to meet specific guidelines. Most investment property securitizations have specific guidelines that disallow properties considered rural.