Should You Get a Home Inspection for a USDA Loan?

Getting a USDA home loan can be an excellent option for eligible homebuyers looking to purchase property in rural areas USDA loans offer 100% financing with no down payment required They also boast competitive interest rates and flexible credit requirements.

But while USDA loans only require an appraisal not a home inspection for approval, buyers should still consider getting an inspection done. Here’s a look at the USDA appraisal process, the benefits of adding a home inspection, and what to expect from the inspection report.

USDA Appraisal Requirements

For a property to qualify for USDA financing, it must pass an appraisal by a USDA-approved appraiser. The appraiser will check that the home meets HUD’s minimum property standards and requirements. Some key items the USDA appraisal checks include:

• Location The property must be in an eligible rural area as defined by the USDA property eligibility tool.

• Value: The appraised value must be equal to or higher than the purchase price.

• Condition: The home must be structurally sound with adequate heating, cooling, plumbing, and electrical systems. There can be no evidence of extensive termite or wood damage.

• Accessibility: The property must be accessible from a street, road, or driveway.

• Zoning and Codes: The home must comply with all zoning laws and building codes.

• Environmental: Septic tanks and wells must meet location requirements.

If the appraisal uncovers defects that don’t meet USDA standards, the lender will require repairs before closing.

Why Add a Home Inspection?

While the USDA doesn’t require it, a home inspection is highly recommended. It provides buyers with an unbiased, comprehensive evaluation of the home’s condition from a licensed inspector. Key benefits include:

• Identifying hidden defects: Inspectors may uncover issues not apparent to the appraiser like improper electrical wiring, leaks, cracks in the foundation, pest damage, etc.

• Avoiding surprises: Inspections reduce the chance of expensive repairs cropping up later. New homeowners can budget accordingly.

• Supporting negotiations: If issues arise in the inspection report, buyers can request sellers make repairs or lower the price accordingly.

• Peace of mind: Inspections give homebuyers confidence they’re making a sound investment in the property.

• Education: Buyers learn about the home’s systems and components like HVAC, roofing, insulation, etc.

For about $300-$500, a home inspection is a small price to pay for the value it provides. USDA borrowers can work the cost into their loan amount.

What to Expect in the Inspection Report

A home inspection provides a detailed examination of the property’s interior and exterior components. The inspection report will indicate the condition of the home’s:

• Structural elements: Foundation, framing, floors, walls, ceilings, roofs

• Systems: Electrical, heating/cooling, plumbing, well/septic

• Appliances: Furnace, water heater, stove, refrigerator, dishwasher

• Features: Doors, windows, insulation, ventilation, fireplaces, chimneys, porches, decks

• Site conditions: Drainage, grading, landscaping, fencing

Inspectors will note any issues discovered and highlight areas that need repair, replacement, or further evaluation by a specialist. Photos are included to document concerns.

Some common problems found in inspection reports:

• Cracked foundations or settling issues
• Leaky roofs
• Faulty electrical systems and outlets
• Clogged drains or leaky plumbing
• HVAC systems beyond useful life
• Pest damage or mold issues

Using the Inspection Report

If the inspection turns up defects, buyers have a few options:

• Request sellers make repairs: For minor issues, sellers may agree to handle repairs before closing. Get repair estimates to negotiate an appropriate credit.

• Ask for a price reduction: For more significant problems, ask sellers to lower the purchase price by the repair costs.

• Withdraw offer: Major red flags may warrant walking away and finding another home. Review with your real estate agent.

• Accept defects: Sometimes it makes sense to accept existing issues, particularly if sellers won’t address them. Budget for future repairs or replacements.

Your USDA loan officer can advise whether inspection findings impact the financing. In some cases, lenders may request another appraisal after repairs are made.

Finding a Qualified Home Inspector

It’s important to find an experienced, licensed home inspector to conduct the evaluation. Here are some tips:

• Verify they carry errors and omissions insurance as well as general liability coverage.

• Ensure they are certified by a recognized national organization like the American Society of Home Inspectors (ASHI) or International Association of Certified Home Inspectors (InterNACHI).

• Check references and reviews from past clients. Look for inspectors with consistently positive feedback.

• Ask about their experience with rural properties, USDA guidelines, and septic systems. Look for familiarity with your local area.

• Inquire about what systems and features the inspection includes to ensure a comprehensive assessment.

Take time to find the right home inspector for peace of mind on the biggest investment you’ll likely ever make.

Are Inspections Required for USDA Loans?

While strongly recommended, home inspections are not an official requirement to qualify for a USDA home loan. The property needs to pass the USDA appraisal standards, which focus largely on eligibility, value, and structural/safety essentials.

An inspection provides deeper insight into the home’s overall condition to inform the buyer’s decision. Work with your USDA lender to determine if inspection findings may impact your financing approval or require any repairs prior to closing.

Weighing the Benefits of an Inspection

Purchasing a home through a USDA loan offers rural buyers the chance to own property with no down payment. But buyers should keep in mind:

Pros of Adding Inspection

• Gain understanding of home’s condition
• Identify hidden defects early
• Prevent expensive surprises
• Support negotiations with sellers
• Ensure home is sound investment

Cons of Avoiding Inspection

• Lack awareness of issues
• Risk buying a “money pit”
• No support for requesting repairs
• Potential safety or health hazards
• Costly repairs down the road

For a relatively small fee, an inspection provides crucial information to protect your investment. Work with your lender to determine the right approach for your USDA home purchase.

FAQs About Inspections for USDA Loans

Buyers new to the USDA loan process often have questions about adding inspections. Here are some frequently asked topics:

Do I have to use a specific home inspector for a USDA loan?

No, you can use any licensed and certified home inspector you choose. There are no special USDA inspection requirements.

What if the inspection reveals issues that don’t meet USDA standards?

Your lender may request repairs before closing to align with USDA eligibility. You can negotiate with the seller on fixing or crediting repair costs.

What if inspection issues mean I no longer qualify for a USDA loan?

Your lender will determine if inspection findings impact your loan eligibility and approval. You may need to switch to another loan program like FHA or conventional.

Can I finance inspection costs into my USDA loan?

Yes, common financing options include rolling inspection fees into the mortgage amount or requesting sellers pay for inspection costs.

How soon before closing should I get a home inspection?

Ideally, complete the inspection as soon as possible once under contract. This gives more time to negotiate with sellers if repairs are needed.

Do I have to be present for the home inspection?

It’s not required, but it can be helpful to attend. You can see issues firsthand, ask the inspector questions, and learn about the home.

Explore Your USDA Home Loan Options

While not mandated, a home inspection is a smart move for buyers using a USDA loan. Make sure you fully understand the property’s condition before completing the purchase. Consult with a USDA lender to learn more about qualification requirements and options for financing inspections.

With an attractive no down payment feature and favorable terms, a USDA loan can make homeownership attainable if you’re looking to purchase in an eligible rural location. Get started on your path to becoming a USDA homeowner today.