USDA Loans: Can You Do Escrow Holdbacks With USDA Loans?

One of the more common questions we get for homes that need a few repairs and are being financed by the USDA loan program is:

Do you allow escrow holdbacks for repairs with the USDA loan program?

Escrow holdbacks are common with other types of loans and many people are curious if the USDA loan program allows escrow holdbacks.

And the answer is…

When proposed exterior repairs cannot be completed because of weather and the work remaining to be done does not affect the livability of the dwelling, an escrow account for only exterior work may be established if the following conditions are met:

  • A signed contract and bid schedule is in effect for the proposed exterior work.
  • The contract for the work must provide for completion within 120 days.
  • A final inspection report must be obtained and Rural Housing and Community Development Service must be notified when the work is completed.
  • The escrow account must be funded in an amount sufficient to assure the completion of the remaining work. This figure should be 150% of the cost of completion, but may be higher if it is determined a higher amount is needed.

So can you do escrow holdbacks with the USDA loan program? Yes. Under certain conditions.

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