Can repairs be included in a USDA Home Loan?
With many trying to expand their eligible property search, having the ability to finance repairs after closing may be an attractive scenario for a seller to consider!
In today’s video, I will show you the USDA loan requirements for both financing repairs as well as the wide range of possible repairs available.
Also, please download our USDA Blueprint for Success. This educational resource helps break down the USDA process step by step. It’s great for both realtors and home buyers alike!
Previous USDA guidelines did not allow roof and plumbing repair to be escrowed and repaired after closing. However, current guidelines now permit a wider range of eligible repair types
USDA Home Loan with Repairs
Eligible types of repairs 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 limited to 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
Also, there is a required 50% deposit of the total repair cost due at the time of closing. This is allotted to cover any potential cost overruns and can be from either the buyer or seller. However, it cannot be financed.
The term “escrowed” means being able to deposit the repair money into a third party’s account. Usually, it is a title company or closing attorney that holds the funds post-closing until further instructed by the lender to disburse.
After successful completion of the required repairs, a documented final inspection completed by the appraiser must be approved by the lender. After approval, the funds are then released from the title company to the contractor along with the 50% deposit to the rightful party.
In summary, USDA loan repairs are not for full-blown renovations but an escrow repair option. However, you can pinpoint specific repair items and allow them to be financed into a USDA loan.
Remember, we are a top-ranked USDA Approved Lender with experience and expertise! With the USDA program, we can help homebuyers make the most of their qualifying ability.
Simply 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 you right here for the next tip of the week!