The USDA appraiser has two jobs. One is to figure out the fair market value of the home, just like any other loan. The other job is to make sure the home meets the USDA minimum property requirements. This is the USDA’s way of making sure the home is safe, sound, and sanitary.
Keep reading to learn the specifics of what the USDA appraiser looks for in a home.
The USDA Home Requirements
Like any appraisal, the appraiser needs to make sure the home is in good condition. But, the USDA has specific requirements the home must meet:
- The foundation must be in good condition without any cracks or other stability issues
- The home must have year-round access from the street
- All systems must be working, this includes the electrical, plumbing, and gas systems
- There should not be any exposed wires or other wiring issues
- The well and septic system must be in good working condition
- There should not be any pest damage
- The house must meet all zoning requirements for the area
- The land cannot count for more than 30% of the home’s value
The USDA Home Value
Of course, a USDA appraiser must also make sure that a home is worth enough money. The USDA allows borrowers to get a loan for 100% of the purchase price. Because of this, the appraisal is very important. If the borrower got a loan for more than the home was worth, the borrower would enter the transaction upside down. As we saw with the housing crisis, house values can decrease at any time; this would put the homeowner in an even more fragile situation.
The appraiser will determine the fair market value of the home based on the most recent sales. Typically, USDA appraisers must use homes that sold within the last six months and are within one mile of the subject property. Because USDA loans are only for rural homes, it may be a little harder to find comparable sales that close, so the appraiser might have to go a little further.
The USDA has the final say in whether a borrower can get a USDA loan. Because the USDA guarantees the loan, the lender needs the USDA’s approval. Therefore, it’s within the lender’s best interest to make sure the home passes the USDA appraisal. If it does and the borrower meets the requirements, the USDA will guarantee a loan for 100% of the purchase price of the home.Click to See the Latest Mortgage Rates»