Understanding USDA Home Loan Inspection Requirements

Should you get a home inspection?

Home inspectionA home purchase is an expensive investment. Nobody wants to make a mistake by buying a house with hidden problems. Many people opt to have their home inspected before buying a property, even though it is not necessary.

USDA offers loans for rural buyers and home buyers who purchase homes in eligible areas. But did you know USDA buyers don't have to go through a home inspection before they can get a loan? It is surprising that so few people know this.

USDA loans have a reputation for being flexible in terms of eligibility, but buyers may find it worrying that there is no inspection. It's therefore important to be familiar with the USDA loan inspection requirements and what you should do if there are any defects in your home.

USDA Inspection Requirements

USDA loans do not require home inspections, however, USDA guidelines state that applicants should have a thorough inspection of their property.

Although a USDA loan does not require a home inspection, it's highly recommended.

Home inspections increase your confidence that you are purchasing a well maintained home. You will also learn more about any potential problems and details of the home you are interested in purchasing.

Home inspectors will check for the foundation of your home and any major mechanical systems such as plumbing and heating/cooling.

These are the benefits of a home inspection:

  • Prepare a detailed report that details all of the major mechanical systems
  • Before you buy the house, identify any problems.
  • Recognize potential safety and health hazards

A home inspection will assess the condition of the property and identify any defects. However, an appraisal is used to determine the property's worth. Appraisals ensure that minimum property conditions are met according to the USDA Handbook and HUD Handbook.

If the USDA appraisal mentions that additional inspections are required (i.e. roof, foundation and plumbing), then those specific inspections would be necessary. These inspections are required if the USDA appraisal cites further inspections (i.e., roof, foundation and plumbing).

A USDA appraisal is not meant to replace a home inspection.

Although home inspections do not have to be done, USDA purchases will need an appraisal.

Property Appraisal

The appraiser's principal function is to ascertain the reasonableness of the sales price (or market value). USDA-approved appraisers are needed to determine the property's worth based on a market analysis.

In all circumstances, a market or sales comparison technique is necessary. Unless the appraiser produces confirmation indicating such comparable sales are unavailable, a minimum of three similar sales will be considered.

The appraiser must utilize their local expertise and sound judgment in selecting comparable transactions that are the most accurate indications of the subject property's worth.

Even if the appraiser is not a licensed home inspector, this does not imply he or she is incapable of detecting any structural, electrical or mechanical concerns. If the appraiser notices an issue that might compromise the buyer's, lender's, or USDA's interest in the property, the appraiser may propose additional investigation(s).

For example, if the roof looks to be in poor condition or the chimney appears to be problematic, the appraiser may propose a roof and chimney examination.

An appraisal prevents lenders from lending you more money than it is worth, and ensures that the loan program meets the USDA and lender requirements.

Individual Water Systems (Private Wells).

The USDA Guidelines require that each water system owned or maintained by the homeowner pass a water testing.

Septic Tank Inspection

Septic tanks are an integral part of every home. They should be maintained to keep sewage from back-up into the home. You need to be careful when choosing the best septic tank for you.

An appraiser certified to confirm that the property meets the Single-Family Housing Policy Handbook requirements would satisfy the lender's request for a septic evaluation.

The septic assessment might need to be rechecked as a result.

Inspecting for Termites

A termite inspection is a method to assess and identify the damage potential to structures by termites. A licensed pest control specialist will inspect the structure for termite activity. They'll look out for mud tubes and damaged wood. The inspector will suggest a treatment plan if termites are detected.

The USDA Guidelines states the following:

If the State or the lender or appraiser may require termite/pest inspections to verify that the property is not infested.

These are the key points to take away from today's tip on home inspections


Although home inspections should be encouraged, they're not mandatory.

An inspection of your home will allow you to learn more about the house you are interested in purchasing and any potential problems.

Additional inspections are possible after the appraisal is completed.

Private wells or individual water systems may require water quality testing, but septic tank inspections do not need to be done (unless the appraisal specifies otherwise).

SOURCE: USDA Chapter 12: Property and Appraisal Requirements

Recommended Reading

  1. Discount Points Could Save You Thousands on Your USDA Loan
  2. USDA Amortization Calculator: How Much Will You Save?
  3. USDA Loan Calculator: How to Pay Off Your Loan Faster