USDA Update! – What repairs can be financed into a USDA loan?
What repairs can be financed with a USDA loan?
Thankfully, I have great news to report! USDA guidelines were recently updated and now allow a wider range of possible repairs and in today’s video I will explain both how it can be possible to finance home repairs with a USDA loan along with eligible types of repair scenarios
Also, if you have not yet done so, please download our USDA Blueprint for Success with the link below, this educational resource helps break down the USDA process step by step and is great for both Realtors and homebuyers alike!
How can you finance home repairs with a USDA loan?
OK, let’s get started with the good news!
Previous USDA guidelines included both roof and plumbing repairs as specific examples that could not be escrowed and repaired after closing.
However, updated USDA guidelines now permit a wider range of eligible repair types which no longer specifically restrict roof or plumbing repairs.
Eligible types of repairs would include but are not limited to:
- Plumbing, Flooring, A/C Units, and also Roof Repairs
- Any type of repair that does not affect the livability or safety of the home
Repair costs are not allowed to exceed the LOWER of either 10% of the proposed loan amount or $10,000.
- Contractor invoice will be required for all repairs
- No self-help allowed
- Repair work to be completed within 30 days after closing
- Appraised value must be high enough to support the new loan amount with repairs
- Repair funds are then taken from the loan and escrowed with the title company at closing
The term “escrowed” means being able to deposit the repair money into a third party’s account, usually a title company or closing attorney, where it will be held post-closing until further instructed by the lender to disburse the funds.
Also, there will be a required 50% deposit of the total repair cost due at time of closing. This is allotted to cover any potential cost overruns and can be from either the buyer or seller, but may not be financed.
After successful completion of the required repairs are documented by a final inspection and approved by underwriting, release of funding from the title company for contractor funds and the 50% deposit occurs.
In summary, we are not talking about the FHA 203K program or any type of full blown renovation loan. Instead, through the ability to finance home repairs with a USDA loan, it allows for an escrow repair option which can pinpoint specific repair items and allow them to be financed into a USDA loan
I realize that we covered a lot today and even though not all lenders have specialize with USDA loans, because of our unique experience and expertise with the USDA program we are able to help homebuyers make the most of their qualifying ability.
As a top ranked USDA Approved Lender, we are here to help so just call or email to discuss your scenario and let us show you the “Metroplex” difference!
(800) 806-9836 Ext. 280
I want everyone to make it a great day and I look forward to seeing your right here for the next tip of the week!