USDA Loans allow repairs
Posted April 25, 2008
USDA Mortgages Can Include Repairs
If you are considering buying a home using the USDA program, there is a great feature that may help you. USDA mortgage loans for the Charlotte outlying areas will allow you to include additional funds over 100% financing to allow for repairs to a home. This is especially helpful when buying a foreclosed home that needs a little TLC.
This can vary based on the investor that will originate the USDA loan, but for the most part funds for repairs can be added to the loan, to a max of 10% of the loan amount (no more than $10,000). The repairs can not affect livablility or safety of the home.
For example, a home priced at $120,000, the max you could use would be $10,000. That money is placed in escrow with the closing attorney to be paid out once the work is complete.
There are a couple other points to consider.
The repair escrow does also require an additional 50% deposit to cover any potential cost overruns. This can not be added to the loan, but can be contributed by ANY party. In other words, if the repairs will cost $10,000, the lender will hold $10,000 in escrow and also require an additional $5,000 (50% of the $10,000) to be placed in the account as well.) That $5000 can be money you deposit, the seller is willing to deposit, or whomever. If that extra money is not used, the extra is refunded to the contributing party. However, if the actual costs runs under the $10,000 estimate that was escrowed, you as the buyer can not get that extra money back as cash. It should be credited back to the outstanding mortgage balance.
The repairs must be done by a licensed contractor and can not be done by you. The contractor will submit an itemized bid stating what it will costs and when they would have it done. Must be completed within 30 days of closing and may be extended if due to weather.
There is usually a small fee to the lender to administer, and there may be a cost from the closing attorney to manage the escrow.
Bottom line: Getting additional funds to improve the property you are buying using the USDA mortgage loan can be done, but it does require a few hoops to deal with. But with no money down, you can not beat this mortgage loan period!
This website provides information on USDA Rural Housing Mortgage loans for home owners and home buyers in the outlying Charlotte area (including Concord, Gastonia, Matthews, Monroe, Huntersville and Ft. Mill as well as all of North and South Carolina.)
Some restrictions apply
Apply online for your Charlotte area USDA mortgage loan
or call 704-651-8704 for your free mortgage consultation.
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