Can you finance home repairs after closing with a USDA loan?
How do you finance home repairs with a USDA loan post closing?
In light of the recent hurricanes Harvey and Irma, we have received multiple questions regarding what options are available to finance home repairs with a USDA loan after closing.
While many lenders may not even offer this option, as a USDA Approved Lender we have utilized this feature many times and are very experienced with handling scenarios that require home repair financing to be combined with a USDA loan.
With that being said, if you have repair issues that are being turned down by other lenders, please take advantage of our FREE SECOND OPINION SERVICE (SOS) which is a great way to access an expert opinion for both new pre-qualifications and loans that are already in progress.
Also, if you would like more details on how to maximize the benefits of a USDA Loan, please download our USDA Blueprint for Success for more qualifying facts.
How do you finance home repairs after closing with a USDA loan?
I have heard this specific concern many times before, where after weeks and weeks of home searching, a buyer is able to find their perfect home, but then required repairs turn up which need to be completed before their dream home can become a reality.
Now, imagine if a USDA loan would allow you to still purchase the home and then have the repairs done after closing? Thankfully, I have good news to share, because this is exactly where a USDA loan can step in to help!
Yes, it is true that the USDA program will allow you to finance home repairs after closing and although this may be a little known option to some, because it allows home buyers to take advantage of properties in need of repair, this can open up available property types and also provide flexibility to sellers since they would not have to complete the repairs prior to closing.
OK, so now let’s go over the highlights:
- Repair costs may not exceed 10% of the final loan amount or $10,000 – whichever is less.
- No repairs permitted that affect liability or safety
- Ideal examples could be the repair or replacement of an A/C, Flooring, and more
- Contractor Agreement and Invoice required for all repairs
- Repairs ideally to be completed within 30 days after closing
- 50% Deposit of the total repair cost is required from either the buyer or the seller
- This amount may not be financed, and
- The purpose is to cover any potential cost overruns, and
- Provided no cost overruns, it would be returned after the repairs have been approved
- A final appraisal inspection report that certifies proper completion of the repairs will be required
- The inspection could be completed on Fannie Mae Form 1004D
- After review to determine satisfactory completion, we then approve release of the repair funds
- Don’t Forget: The appraised value must be high enough to support the increase in loan amount to include the financed repairs.
Most importantly, remember that USDA loans are in the blood of my entire team!
Remember, as a USDA approved lender, we hold expertise in the USDA process and are a one stop point of contact from pre-qualification through closing.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
Let’s make it a great day and I look forward to seeing you right here for the next tip of the week!