USDA and VA loans are basically the only 100% financing programs available in today’s mortgage markets. VA is available anywhere, but you must be a veteran to be eligible. USDA is available to anyone who meets the requirements, but the area must be eligible. In areas where the property is eligible for both VA and USDA financing, USDA has an advantage with regards to termite reports.
When you purchase a property and a termite report is completed, the termite company will distinguish between “section 1” and “section 2” recommendations. Section 1 items are where active infestation or dry rot has already occurred and it is recommended that the repairs be made. Section 2 items are areas that show the beginnings of problems which could require action in the near future.
On VA loans, section 1 findings are always required to be cured by the seller and section 2 repairs are at the lenders discretion. However, on USDA if the termite report is not asked for in the contract, there is no requirement that any termite work be done on the property. This less stringent guideline on USDA loans can be helpful on properties where a seller (especially if it is a bank) is selling a property “as is” and is refusing to complete any termite work. If the borrower is aware of the scope of the repair work, and is willing to buy the property without the work being done, he or she can do that with a USDA loan.
If you are in negotiation on a property in a USDA eligible area and the seller is refusing to offer any termite repairs, USDA financing might be a useful option for financing your purchase.
Baxter Scruggs is a mortgage banker specializing in USDA loans in California, NMLS #156370. He can be reached at firstname.lastname@example.org, or at 760-497-7705, or toll-free at 877-347-0004, ext. 226. Licensed by the California Department of Business Oversight under the California Residential Mortgage Lending Act. The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Terms and conditions apply, all loans subject to underwriter approval. Subject to change without notice. Guild Mortgage Company NMLS #3274