Appraisal Requirement
In 2008, USDA adopted HUD Handbooks 4150.2 and 4905.1 to determine that a home meets minimum property standards. It is noteworthy that the thermal requirements (insulation R-Factors and storm windows and doors) on existing homes as well as landscaping requirements were dropped in 2008. Adopting the FHA property standards and dropping the thermal and landscaping requirements were huge improvements to the program. It is important for the appraiser to who can certify that the requirements of HUD Handbooks have been met; therefore, the lender will select appraisers who are on the FHA appraiser roster. More >>>>>>>> When a home does not meet minimum property standards, repair escrow accounts for post-closing repairs are available More >>>>>>>>
Site Size Allowance
There is no minimum or maximum acreage requirement for homes financed under the USDA program. The site just has to meet the definition of "modest" which is measured by value. Generally, the value of the site must not exceed 30% of the total market value of the property. For example, if an appraisal shows a home to have a site value of $70,000 and a total value of $250,000, the value of the site would be 28% of the total value, and therefore the property would be eligible. It should be noted that the 30% limitation may be exceeded if the site is typical for residential properties in the area and the site cannot be subdivided into two or more sites.
Private Wells
The local health authority or state certified laboratory must perform a water quality analysis. The water quality must meet state and local standards. The Safe Water Drinking Act does not apply to private wells. In addition, the well must have an adequate flow level measured at a minimum of 3 -5 gallons per minute for an existing well and 5
gallons per minute for a new well.
Septic Systems
Private Septic System: The septic system must be free of observable evidence of failure. An FHA roster appraiser, government health authority, licensed septic professional, or qualified home inspector may perform the septic system evaluation. An FHA roster appraiser or qualified home inspector may require an additional inspection due to their observations.
In-Ground Swimming Pools
In-ground swimming pools are allowed. However, the value of the swimming pool must be deducted from the appraised value before computing the maximum loan amount. For example: $100,000 appraised value less $10,000 swimming pool contributory value equals $90,000. In this example the maximum loan amount must be computed based on $90,000, which excludes the contributory value of the swimming pool. The current up-front guarantee fee for purchase transactions is 2 percent; therefore, the maximum loan amount in this scenario would be $91,800. Typically, a swimming pool has contributory value and adjustments are made for comparable sales that do not have swimming pools. However, it is possible that a swimming pool does not have a contributory value.
Outbuildings
The property may have outbuildings or structures that are considered related facilities for residential use. However, farm service buildings designed to produce an agricultural commodity and buildings designed to produce income are prohibited. It is important to note that farm service and income-producing buildings are prohibited regardless of the value of the the buildings, the intended use of the buildings, or the profitability of the property. Photos of acceptable related facilities contrasted with prohibited farm service and income-producing buildings are found here >>>>>>>>
Driveways
Driveways must be contiguous to and have direct access from a street, road, or driveway. They must be constructed of a hard surfaced or all-weather surface, which would mean road base and gravel at a minimum.
Private Roads
Private roads leading to the drive way must also be constructed of an all-weather surface. Also there must be a recorded easement giving the homeowner access to the road, or the road must be owned by a homeowners' association. In addition, there must be a recorded road maintenance agreement, or the road must be maintained by a homeowners' association.
Flood Zones
USDA discourage lending in designated flood and mudslide
hazard areas. Therefore, loan guarantees purchasing a property in a designated flood or mudslide hazard areas is not allowed unless there is no practical alternative. If can be shown there is no practical alternative, the first floor level must be above the 100-Year flood zone elevation and the borrower must purchase flood insurance.
hazard areas. Therefore, loan guarantees purchasing a property in a designated flood or mudslide hazard areas is not allowed unless there is no practical alternative. If can be shown there is no practical alternative, the first floor level must be above the 100-Year flood zone elevation and the borrower must purchase flood insurance.