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USDA has some very specific property rules. Each home must meet these rules in order to get approved for the funding from USDA.
The USDA home loan is an ideal mortgage for people that wish to avoid making a large down payment. With the USDA’s no down payment option, potential homebuyers can qualify and save thousands of dollars in out-of-pocket expenses.
We will explain the property rules and their importance in the home buying process.
The guidelines for the home are referred to as the USDA minimum property requirements. As the name implies, this is the absolute minimum standard for a home in order to be considered for a mortgage.
- Walls – the exterior walls and interior walls need to be structurally sound. The walls cannot have evidence of mold or rotting or any sign that the structure of the wall is compromised.
- Doors – any door that leads to the outside must have a lock that works. All doors on the inside of the home must be properly hung and currently in working order.
- Foundation – The foundation may not be allowed to have visible cracks. Foundation may not have any issues with moisture.
- Floors – All floors should be in good condition without noticeable hazards.
- Roof – The roof may not have any apparent hole or leak. The roof needs to be inspected and have at least 5 more years of use remaining.
- Windows – every window needs to be in working order without major damage. Windows are not allowed to have any visible mold or cracks.
- Electrical system – The electrical system should be in reliable working order without any noticeable issues.
- Plumbing system – the plumbing system should be in reliable working order without any noticeable issues.
- Termite & pests – an inspection needs to show that there is no termite infestation or any kind of infestation from any type of pest.
- Stairs – any set of stairs, whether inside the home or outside the home, must have a usable handrail that is correctly connected to the stairs. Stairs need to be in good order with no visible issues.
- Sump pump – if the home has a sump pump it must be working properly.
- Access to property – The home must be accessible to the street during the entire year. There cannot be a hazard that prevents the person from accessing the home’s driveway or sidewalk.
- Outside areas – any porch, garage, carport or deck must be in good shape without any apparent hazard.
Provided that the home meets these guidelines, you should be able to proceed with the loan application.
Inspecting the Home and Repairs
The USDA home appraiser will inspect the home and determine if the property has met the guidelines above.
If there is an issue with any item, the area must be repaired or replaced in order to come up to the standards of the property guidelines.
All repairs or replacements will have to be completed and re-inspected by the appraiser before the loan can be scheduled for closing.
Generally speaking, the seller will be responsible for covering the cost of any repairs. The seller may ask that the buyer pays for the repair, but there is no guarantee that the loan will be approved after the repair is made. This provides quite a bit of risk for the buyer and is usually a bad sign for the transaction.
Property Requirements Protect the Buyer and Lender
The property requirements cover two objectives at the same time.
First, the requirements provide a level of assurance that the home buyer is getting a home in good shape without any hazards. If the home had significant issues that were either unnoticed or covered up before the purchase, the buyer might feel compelled to stop making payments on the home and let the loan default.
Secondly, property requirements protect the lender. The lender does not want to provide money on a home that has major issues that can eventually cost the buyer more than the home is worth. They also don’t want a home in bad shape just in case the buyer goes through a life event that prevents them from continuing to make the payments on the home.
Final Thoughts on USDA Loan Property Requirements
By looking for a home that is in good shape and likely to meet the minimum standards set forth by the USDA, buyers should be in a good position to put an offer on the home and hopefully get approved for the financing.
Additional USDA Loan and Home Buyer Resources:
- Anita Clark takes an in-depth look at USDA loans and the history of the program. Learn why the program was created, qualifications of the program and the limitations of the USDA loan.
- Whether it’s a plumbing or HVAC issues, there are common repairs that repeatedly show up on home inspection reports. Take a look at this post by Jeff Knox to learn the most common repairs after a home inspection.
- Learn who is eligible, the benefits, the fees and the different types of USDA loans. Joe Boylan does a great job of going through the different aspects of the USDA loan and how USDA loans work.
About the author: This article on the “USDA Loan Property Requirements” was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of his social media profiles as well as generating new leads from his website.
MadisonMortgageGuys.com and team provide award-winning customer service to clients who need to purchase a home or refinance an existing mortgage. Our company currently serves 47 states and you can find specific USDA information for multiple states on our website. Take a look at our Wisconsin USDA page for detailed program information specifically for WI residents.
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