You signed a contract and now you are anxious to close on your loan. If you have USDA financing, you may have heard that it takes a while to get to the closing. While this isn’t exactly the case, it does take slightly longer for USDA loans for one reason – the USDA has the final say on your approval.
Typically, one of the final steps you take in a home purchase is the appraisal. Most borrowers wait to schedule it until they know that their financing is in good shape. This is because it is your obligation to pay for the appraisal. Typically, you’ll pay for it upfront as it’s a third-party service. Since it can cost several hundred dollars, most borrowers want to make sure that their financing will go through before they pay for the appraisal.
Getting the Appraisal Done
It usually takes from a few business days to a week to get the appraisal report back once the appraiser visits the property. This is because the appraiser has to write up a report on what he saw. He will comment on the size and conditionof the subject home. He will also write up a report on the comparable sales in the area. These are homes that are of similar size and have similar features that sold within the last six months. Typically, these homes should be within a close distance of the subject home.
Once the appraiser returns the appraisal report tothe lender, the lender processes it according to the loan specifications. The largest concern is that the home is worth enough to support the value of the home. If the appraiser decides that the home is worth less than you bid to pay on the home, it could cause an issue with your financing. Lenders can only give you a loan based on the appraised value. If the value doesn’t support the purchase price, you may lose your loan.
Assuming that the appraisal comes back with a value either equal to or higher than the purchase price, you can move forward with your USDA loan. The lender will make sure that the home meets all of the USDA guidelines. This includes:
- The home must be in safe, sound, and sanitary condition.
- There cannot be any moisture issues in the crawl space, basement, or foundation.
- The foundation must not have any cracks.
- All doors and windows must be in good working order.
- All flooring must be safe from any hazards.
- The roof must have at least five years left on it and not have any leaks or damage.
- All plumbing and electrical systems must be in good working order.
- There must not be any termite or pest damage.
Once the underwriter okays the appraisal and approves the file for closing, the USDA handles what is next.
The USDA Approval
The underwriter must send the USDA a complete underwriting package for your loan. This includes all of your income, asset, credit, and appraisal information. The USDA will then process the packages in the order that they are received.
It’s important to know that the USDA only accepts complete packages. If your underwriter sends an incomplete package, the USDA will reject the package and require the underwriter to send the missing information. This can put your loan at the end of the queue.
Once the USDA has a complete package, it typically takes a few days to a week to get their approval. Once they sign off on your loan, you are free to close on your USDA loan.
In a nutshell, it can take a week or a few weeks to get your loan from appraisal to closing. It depends on the speed of your lender and their knowledge of the USDA process. It’s important to choose a lender that has knowledge of the USDA process in order to eliminate any downtime that the lender may cause by not providing the USDA with a complete package. When everything is done right, you should get to the closing table in about the same time that you do for any other loan program.