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How do you qualify for a USDA Renovation and Repair Loan? – Part 1

June 17th, 2022 by Sean Stephens

How do you qualify for a USDA Renovation and Repair Loan in Florida, Texas, Tennessee, and Alabama?

How do you qualify for a USDA renovation and repair loan? Can USDA home improvements be completed after closing in Florida, Texas, Tennessee, and Alabama? Can you include home repairs with a USDA loan?

USDA repair and renovation loan in Texas, Tennessee, Florida and AlabamaThe ability to include home repairs and renovations within a USDA No Down Payment Loan may one of the best kept secrets and one which can also make a truly big impact in the homebuying process!

With so many homebuyers looking for properties, having the flexibility to customize through a USDA renovation loan and include repairs into your loan for completion after closing, can be a real game changer when trying to maximize current housing inventory.

In today’s short video I am going to provide details on how to qualify for a USDA Renovation Loan and explain the different USDA home repair options available.

Now, before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the process step-by-step and is a great tool for both homebuyers and Realtors alike.

How do you qualify for a USDA Renovation and Repair Loan in Florida, Texas, Tennessee, and Alabama?

As a starting point, USDA No Down Payment Loans offer high flexibility when financing renovations and repairs after closing with the following options being available:

  • $10,000 repair escrow holdback for certain eligible items. (This is more limited in scope then the other options.)
  • Up to $35,000 for non-structural repairs where the home must be considered habitable at time of closing.
  • Structural repairs or improvements exceeding $35,000 for properties needing more extensive rehabilitation.

USDA Repair Escrow Holdback

While each has different eligibility criteria, let’s begin by reviewing the USDA Repair Escrow holdback feature.How do you qualify for a USDA Renovation and Repair Loan in Florida, Texas, Tennessee, and Alabama

Just as the name says, USDA loans allow for certain repairs to be placed into escrow and held back for the work to be done after closing subject to the following criteria:

  • Home must be habitable while the repair work is being completed;
  • The repair work does not affect the livability of the dwelling, nor the health or safety of the occupants;
  • A signed contract between the borrower and the contractor is in effect for the proposed work;
  • The funds to be escrowed are not less than 100 percent of the repair cost contract.
  • The approving loan underwriter may determine the escrow amount, which could exceed the repair cost;
  • The Closing Disclosure reflects the holdback; and
  • A final certification of completion is required by the appraiser to verify the work was completed in accordance with the requirements and conditions in the original appraisal report.

Additionally, the USDA Repair Escrow Holdback feature also provides for a more limited repair option when the work is to be completed without the services of a contractor subject to the following requirements:

  • The estimated cost to complete the work is not greater than 10 percent of the total loan amount; and
  • The escrow amount is less than or equal to $10,000; and
  • The lender has determined the borrower has the knowledge, skills and time necessary to complete the work

Approved Florida USDA lenderRemember, to finance any repairs into a USDA, the appraised value must be high enough to support the loan amount with the repairs included. Also, the appraiser will initially appraise the home subject to the repairs being completed. What that means is the appraiser’s initial estimate of value would be “as if” the repairs were completed but this value is subject to the repair work being finalized.

Please note that any repair request is truly on a case-by-case basis depending on the facts of the situation and property involved. If you are looking to obtain a USDA loan with home repairs, having upfront budgets and estimates for the work to be done will help organize the start of the process.

Join us next week as we further explore the USDA renovation loan option which allows up to a $35,000 repair limit!

As a USDA Approved Lender under the Single-Family Housing Guaranteed Loan Program, we will walk you through the USDA loan qualifying process step-by-step.

As a USDA and VA Approved Lender in Florida, Tennessee, Alabama, and Texas, let our experience and expertise go to work for you!

Just call, email, or text to discuss your scenario and let us show you the “Metroplex” difference!

Toll Free: (800) 806-9836 X 280

Call/Text: (863) 593-2001
SeanS@MPLX.org

Don’t forget to download our USDA Blueprint for Success with this link.

USDA Blueprint for success

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