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Zero Down USDA Renovation and Repair Loan
Borrowers can now combine the benefits of the FHA 203k Renovation Loan with the cost savings of a USDA Loan using the new USDA Renovation Loan. USDA eligible borrowers can obtain one loan, to purchase a house and include a repair escrow budget to finance renovation and rehab projects (including major structural repairs), after the loan closes.
Benefits of the USDA Renovation and Repair Loan:
- The USDA Renovation Loan program allows USDA eligible borrowers the benefit of creating one loan amount, including a repair escrow budget to finance renovation and rehab projects (including major structural repairs), that will be combined with the purchase price of the house
- Repairs are made after settlement, so there will be no delays on a transaction closing due to appraisal mandated repairs
- Homebuyers can update and customize a house to their personal requirements
- Greater appraised value, as the USDA Appraiser will determine the property value based on the “as-improved” Vs. the current “as-is value”
- Lower Monthly Mortgage Insurance or PMI, compared to a comparable FHA 203k Renovation Loan
Eligible Repairs:
- Removing safety and health hazards
- Making the dwelling accessible to persons with disabilities
- Repair or installation of septic system and water wells
- Additions or structural alterations
- Modernization (kitchens and bathrooms, interior floor cover, exterior siding, etc.)
- Installation of energy conservation or weatherization feature
- Repairs to existing swimming pools, hot tubs, or saunas
Process and Planning:
- Preliminary Approval. Determine how much you can qualify for under the USDA Renovation Loan Program. This will require that you make a loan application and provide income and assets documents. This program requires a minimum credit score is 580 for all borrowers on the loan and an approval level of Accept/Eligible, Refer, and Refer with Caution.
- Find a house you want purchase and provide an estimate for the cost of repairs needed to the property
- Upon having your offer accepted by the Seller, provide a full General Contractor invoice detailing the repairs and renovation work being performed
- Loan package will be provided that includes the combined purchase price of the house and cost of the repairs
- Upon loan approval you will close on the transaction. When you close on the house you will acquire the property, a repair escrow account will be set aside to fund the repairs and renovation, and the General Contractor can start work on the house