Today, you can still buy a home with a 100% USDA loan product. Let me tell you about important restrictions that may hinder a sale and end up costing the buyer an appraisal fee. A buyer locates a property, gets it accepted, and opens escrow. The appraisal is ordered and when it comes back the underwriter says, “Fix the following to conform to the USDA loan guideline requirements.”
On the list, there is an astoundingly long list of repairs required called “costs to cure” to bring the property up to minimum standard in order for the loan to be approved. Here is a sample of a recent list I encountered:
- property needs a new roof
- paint interior and exterior
- have a mildew specialist confirm that all mold and mildew spores have been removed
- if any part of the home is non-conforming, make it so which meant, in this case, removing a bathroom
- fix all screens and windows
- make sure all appliances are in working order
- have the cesspool certified that it is in working order
- the property is a REO bank foreclosure and the bank was not willing to spend that kind of money to cure the problems to satisfy the underwriter’s guideline
The buyer decides to pass on this home, but has learned what to look for before he makes an offer on the next property. The mortgage broker says if there are non-conforming issues and the appraiser does not give a value to them, it is possible the loan underwriter reviewing the file may decide to fund the loan.
A buyer needs to be aware that the overall appraisal content may “trigger” a response and getting the loan might not be possible. Thankfully, this buyer took the news in stride and now knows what to expect for non-conforming properties that have extensive deferred maintenance.
Take care and have a great week.