USDA Home Loan Inspections: What to Know

The USDA home loan program helps eligible borrowers in rural areas purchase a home with no down payment One of the key steps in the USDA loan process is the appraisal – but what about a home inspection?

Unlike FHA and VA loans USDA loans do not require a home inspection. However, it is still highly recommended for USDA borrowers to get an inspection. Here’s what to know about home inspections with a USDA loan

USDA Appraisal vs Inspection

With a USDA loan, the property must be appraised to determine its value and condition. The appraisal involves an interior and exterior inspection of the home.

However, appraisals are different from a full home inspection Appraisers focus on safety and soundness to meet basic requirements for the loan program. Inspectors take a more comprehensive look at all the home’s systems and components.

Key differences between USDA appraisal and home inspection:

• Purpose: Appraisal for value, inspection for maintenance issues
• Depth: Appraisal is visual, inspection is more hands-on
• Systems: Inspector tests functioning of systems
• Defects: Inspector notes minor flaws appraiser may not

So while the USDA appraisal will identify any major defects, a home inspection offers a more complete assessment of the property’s condition.

Benefits of Getting an Inspection

Even though it’s not required, there are good reasons for USDA borrowers to get a home inspection:

• Learn about the home’s condition – Inspection identifies maintenance issues and minor flaws the appraiser may miss. Gives you a complete picture of the property.

• Protect your investment – Major issues identified early allow you to negotiate repairs, warranty, or lower price from the seller before closing.

• Make informed decisions – Gives you objective information to assess if the home is a sound investment and good fit for your needs.

• Educate yourself – Inspector teaches you about the home’s systems so you can maintain and operate them correctly.

• Peace of mind – Confirms home is structurally sound and safe for your family. Gives you confidence in major purchase.

Though it comes with an upfront cost, a home inspection can save you money and headaches down the road.

When to Get an Inspection

It’s best to get an inspection as soon as possible once you are under contract. This allows time to get any issues addressed before closing the loan.

You can get an inspection done even before making an offer, but keep in mind:

• Inspections are only valid for a certain time period. If the purchase takes too long, you may need to get an updated inspection.

• Problems identified early may impact your offer price and negotiations. Some sellers may be reluctant to allow an inspection before going under contract.

Discuss the best inspection timing with your real estate agent. Some agents routinely advise inspections before making an offer.

How USDA Inspections Work

When getting a home inspection for your USDA purchase, here’s how it typically works:

• Hire an inspector – Make sure they have proper licensing. Your agent can recommend inspectors familiar with homes in the area.

• Schedule the inspection – Inspector coordinates with real estate agent to access the home for 2-3 hours. You can attend but are not required to.

• Inspector examines the property – Using specialized tools and equipment, the inspector looks at the roof, foundation, walls, plumbing, electrical, HVAC, appliances, and more. They will test functionality and look for damage, wear and tear, and other issues.

• Review the inspection report – Inspector provides a detailed report of findings, highlighting any recommended repairs. Major issues are flagged as safety hazards.

• Request repairs from seller – Use report findings to request repairs or credits for issues identified. Renegotiate price if needed.

• Verify repairs – Confirm all repairs were completed properly. Get any warranties on work done.

Your USDA lender does not need a copy of the inspection report. It is for your own information to make a wise decision about the property.

What Inspectors Check in a USDA Home

A home inspector will check all aspects of the property. Areas inspected include:

• Roof – Materials, age, leaks, ventilation, flashing
• Exterior – Siding, paint, trim, windows, doors, decks, drainage
• Foundation and structure – Cracks, leaks, party walls, joints
• Plumbing – Pipes, water pressure, drainage, water heater
• Electrical – Panel, wiring, outlets, grounding, fixtures
• Heating and cooling – Age, leaks, venting, distribution
• Insulation – Type, levels in walls, attic, floors
• Ventilation – Bathrooms, kitchen, dryer
• Interiors – Walls, ceilings, floors, doors, windows, steps
• Appliances – Ages, functionality of built-in appliances

USA home inspectors follow a standardized checklist and protocol. The inspection provides a clear assessment of the current condition of the home’s systems and components. This allows you to make the most informed decision about purchasing the property.

Paying for the Home Inspection

Home inspections typically cost $300-$500, depending on your location and size of the home. Additional fees may apply for things like septic system or well inspection, radon test, mold testing, and more.

You will pay the home inspector’s fee directly at the time of service. The cost of the inspection is your responsibility as the buyer.

However, some buyers are able to negotiate for the seller to pay for the inspection as part of the purchase agreement. This isn’t too common, but is something you could request depending on the situation.

Some things to keep in mind if trying to get the seller to pay the inspection fee:

• Have the seller choose from a list of inspector referrals you provide

• Specify a maximum fee you expect the seller to cover

• Make the request early in the negotiation process

• Be prepared to pay it yourself if seller declines

• Get any agreement for seller-paid inspection in writing

Using Inspection to Negotiate Repairs

One of the big benefits of getting a home inspection is the ability to request repairs from the seller prior to closing.

If the inspector identifies issues or defects with the home, you can go back to the seller with a repair amendment to the purchase contract. This asks the seller to correct specified issues found during inspection at their own expense.

Some tips when negotiating repairs:

• Focus on safety hazards and major defects – roof leaks, electrical issues, structural problems, etc.

• Attach full inspection report to document requested repairs.

• Get repair estimates to justify amount requested from seller.

• Prioritize requests just in case seller won’t agree to all.

• Offer to split costs if seller won’t cover all repairs.

• Be flexible – inspection gives you information to negotiate, not force repairs.

• If no agreement, consider walking away or adjusting offer price.

• Verify repairs were done properly once completed.

Negotiating repairs is complicated but critical. An inspection gives you the facts and leverage. But you still need patience and compromise to reach an agreement with the seller that protects your best interest as the buyer.

In Summary

While not mandatory, having a home professionally inspected is highly recommended when buying a home with a USDA loan. Paying a few hundred dollars upfront for an inspection can identify issues that could cost you thousands down the road. Protect yourself by learning all you can about the property before purchasing.