Rural Housing News

Unique Feature of the USDA Rural Housing Guaranteed Program....the Repair Escrow.

Today's housing market is chock full of foreclosures...homes that range from almost new to...well....how can we say...slightly damaged.  Angry past owners or simply vacancy over the last couple of years have resulted in some homes that need some TLC. 

A little background first.  The RD Guaranteed Loan has property condition requirements, just like FHA.   The home must meet the 4155 HUD Property Requirements as far as condition. If it does not, the loan cannot close regardless of the quality of the borrower.  In previous years, the resident owners of the home would quickly make the repairs and off to the closing table we would go.  Now, with so many foreclosures, the owners...(banks) are selling the homes "as is".  Meaning they are not making any repairs required for financing. 

This is where a repair escrow comes in.  If the home appraises for higher than the purchase price, the cost of the repairs can be added to the loan...up to the appraised value.  There are limitations on the types of repairs as well as the amount allowed to be escrowed - minimum is $500 maximum is 10% of the loan amount or $15,000.  For minor repairs and things like appliances it is perfect! 

Requirements of Escrow:  The work cannot be done by the buyer.  It must be done by a legitimate business not related to any of the interested parties.  Bids are required and are reviewed by underwriting, and work must be completed within 30 days.  There are extra fees incurred for inspections and escrow management, but they are minimal.

Process:  The loan closes for the full amount (purchase price plus escrow) The funds for escrow are at the title company, or lender who oversees the disbursement.  The work is done, final invoices provided inspection of work done by the appraiser and the check(s) are cut! 

We've learned that every situation is different, but this is a fantastic and cost effective way to purchase a home with today's great rates and affordable prices.  This just might be the product for you, give us a call to learn more.

For projects that require repairs in excess of these guidelines, we have other options.

We are eagerly looking forward to the year ahead providing this wonderful home loan to a wealth of deserving home buyers.  Feel free to give one of our educated home loan experts a call to discuss your situation.