Buying a ​Kentucky home with a ​Rural Housing Development USDA loan?



Here's what you need to understand about the inspection process to ensure your journey to homeownership is as smooth as possible:

๐Ÿ”น Inspections for Kentucky USDA Loans aren't required, but highly recommended! While​ Kentucky USDA loans don't mandate home inspections for approval, getting one is in your best interest for a thorough understanding of your future home's condition.

๐Ÿ”น An appraisal is essential for loan processing, assessing the property's value and ensuring it meets Kentucky USDA standards. However, it's not a substitute for a detailed home inspection, which can uncover hidden issues.

๐Ÿ”น Water quality tests are a must for private wells. Ensuring your future home has safe drinking water is crucial. A water quality test is required for homes with private wells, adhering to state or EPA guidelines.

๐Ÿ”น With ​Kentucky USDA loans, navigating through the various requirements can be complex. It's essential to work with lenders experienced in USDA loans to guide you through the process.



Whether you're aKentucky first-time homebuyer or a seasoned ​Kentucky Realtor, understanding these key points can help prepare you for what lies ahead in the USDA loan process. Remember, being informed is your first step towards a successful home purchase!

As with all loan programs, the USDA Loan requires that an independent appraiser inspect the subject property in order to determine the property value. Specific to a USDA Loan, the appraisal report will be conducted by an FHA approved appraiser. The appraisal report must include verbiage or similar verbiage:

“The subject meets minimum standards as set under guidelines established by the U.S. Department of Housing and Urban Development and indicated in Handbooks 4000.1”

No different from a FHA or VA appraisal inspection, the appraiser is required to document all property deficiencies that preclude the appraiser from signing off on their report. A property deficiency is any defect to the house that the appraiser deems necessary to have repaired to ensure compliance to the loan program guidelines. Typical examples of property deficiencies include:

  • Chipped and peeling paint
  • Missing handrails on stairs and railing on decks
  • Lights not working properly and wires hanging out of the electrical box
  • Non-working heating and cooling systems and plumbing
  • Houses that do not have utilities turned on

If a property has deficiencies, the appraiser will determine the value of the property, but state that their report is subject to the property defects listed being corrected. After the property defects are repaired, the appraiser will re-inspect the property, and signoff if the required repairs have been completed.

Bottom line, the USDA Loan program is designed to finance homes that are in move-in condition, not fixer-uppers. However, on a subsequent email I will review an option to establish a repair escrow account to address certain property deficiencies. The repair escrow account is only available through one of my many USDA lenders, so it is imperative to inform me when making an offer a house if this option will be required.

Kentucky USDA appraisals

Kentucky USDA appraisals can take home buyers by surprise. That’s why we’ve put together some good-to-know info about the process. Feel free to use this to help educate your clients. 

The property must pass an FHA appraisal, so USDA and FHA have the same appraisal requirements, which determines the current market value and makes sure the house meets certain safety standards. Here is a list of items an FHA appraiser may look for:

General Health and Safety

  • Foundation or structural defects
  • Whether the utilities (water, sewage, heat, and electricity) all work
  • Chipped or peeling paint in homes built before 1978
  • Incomplete renovations
  • Water damage
  • If the property is accessible to vehicles, especially emergency vehicles
  • Exposed wiring and uncovered junction boxes
  • Whether the house is too close to outside hazards, such as a leaking oil tank or a waste dump
  • Excessive noise, such as being close to an airport
  • Missing handrails

Exterior

  • Leaky or defective roof and holes in the siding
  • Leaning or broken fencing 
  • Doors that don’t properly open or close
  • Condition of gutters, chimney, stairs, railings, and porches
  • If swimming pools are up to code 

Every Room

  • Whether each room has electricity
  • Whether each room has a window or door to the exterior to be used as a fire escape

Kitchen

  • Missing or broken appliances usually sold with a home, including stove and refrigerator
  • Broken or leaking sink

Bathrooms

  • Broken or leaking toilet, sink, or tub/shower
  • No ventilation (either an exhaust fan or window)

Crawl space or basement

  • Basement moisture
  • Evidence of past or present standing water

Heating and Plumbing

  • Inoperable HVAC
  • Major plumbing issues and leaks

These are some common items an FHA appraiser looks for, but other issues that might make a house unsafe could keep it from passing. An FHA appraisal is not the same as an independent home inspection. It’s still a good idea to get a separate home inspection to make sure you’re making a wise investment! 

USDA APPRAISAL REQUIREMENTS FOR KENTUCKY MORTGAGE LOANS


Posted by Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA  

 Appraisalappraisal issuesappraisal standards for USDA RHSproperty eligibilityUSDA APPRAISAL REQUIREMENTS


Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708
fax: 502-327-9119
email:
 kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/


NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574


The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval
nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).