Important Things to Know about USDA Loan Appraisals
In any loan, the loan appraisal plays an important role. It allows the lender to know that the borrower has enough collateral in case they default on their loan. The appraisal required when taking out a USDA loan comes with some nuisances that every borrower must understand before applying. Below are some things that borrowers should know:
Guidelines Set by the USDA
The USDA is the final party that will decide whether a loan application is approved or not. That is why they can set some requirements on the home appraisal. Although these requirements may usually be typical, borrowers must be aware of them. The USDA set the following guidelines to determine the suitability of the house for USDA financing:
- Livability of the home. It is important for the borrower to move into the house right away after the closing. In case the house has major problems that will prevent the new owners from moving in, it is not eligible for USDA financing.
- Being up to code. Every city and country has codes that every house should meet to be livable. The appraisal carried out the by the USDA should find out the house lives up to these codes.
- Location. The house should be located in a rural area based on the USDA maps. Check out usdaloan.com for more information.
USDA Appraisal Details
The appraiser from the USDA will be looking into the following intricate details:
- The permanent structures such as the roof, walls, and others should not have any holes.
- The house should not have any broken doors or windows.
- The plumbing and electrical systems should be in good, working condition.
- The septic and well systems must be in good condition and at least 100 away from the house.
- The furnace and other utilities must be in good condition.
- The foundation should not have any problems or cracks.
- There should be no water, pest, or mold damage in the attic and basement.
- The house should be in an area with an access to the stress at any time of the year.
Exclusions to the Appraisal
Since the USDA loan is meant for families that have small to moderate income, the house should be moderate too. The USDA appraiser should determine that the house has enough size for the family; however, not too big. Additionally, when appraising the home’s value, the appraiser will not include the outdoor luxuries like pools. Also, the land’s value will not be included if it exceeds more than 30 percent of the home’s value.
It is important to keep in mind that an appraiser doesn’t work as an inspector. Although they may need to look for the same things that inspectors look for, a home inspection tends to be more complex and detailed. The job of the USDA’s appraiser is to ensure the lender is protected before they lend money to borrowers to purchase a home. Also, they protect buyers by ensuring the house has no major problems which could become a money pit for the new owners.