The USDA loan allows buyers in rural areas with low to moderate income to buy a home with no money down. While it sounds great, you can’t just go out and buy any home. The USDA wants lenders to make sure the home is safe, sound, and sanitary. At a minimum, the home must pass the USDA’s minimum property requirements.
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Keep reading to learn what a home must have in order to qualify for USDA financing.
THE USDA MINIMUM PROPERTY REQUIREMENTS
The USDA has strict requirements in place to ensure that the home is worth financing. The USDA guarantees the loan for lenders. In other words, if you default on your loan, the USDA will pay the lender back a portion of what they lost. In order to ensure that the collateral is worth insuring, the USDA requires the following:
- You must be able to access the house from the street without obstructions year-round
- The home’s structure, including the foundation and walls must all be in good condition without any cracks
- The flooring throughout the home must be in good condition without cracks
- The foundation must not have any mold, moisture, or pest issues
- The roof must be free of leaks or damage and must have 3 -5 years of life left on it
- Any stairs must be in good, working condition with a handrail present
- All systems including the plumbing, electrical, and gas systems must be in good working order
- If the home is on well and septic, the system must be in good working order
- The home must be free from pest damage
- The basement and/or crawlspace must not have any mold or mildew
- All doors must be working
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DEALING WITH ISSUES WITH THE HOME
If the home has issues, meaning the appraiser doesn’t think the home meets all of the above requirements, the issues must be fixed. The USDA requires that the issues be resolved before you close. This means you must go back to the seller and negotiate the repairs. If the seller refuses, you have one of two options:
- You can walk away from the home
- You can pay for the repairs yourself
The USDA recommends that you don’t pay for repairs that exceed $500. This is to protect you since paying or repairs on a home you don’t own yet is risky. What if the sale falls through? Then you don’t have a home and you lost money on the deal.
While the USDA’s guidelines may seem strict, they are there to protect you. If you buy a home that has a leaking roof or cracked foundation, you could be looking at thousands of dollars in repairs. If you don’t have the money, it could put you into financial despair. Now you have to choose between fixing up your home to make it livable or paying the mortgage. It’s not a good place to be and it’s a place the USDA tries to avoid to help you enjoy ownership and have financial security.