Many of us in Rural areas do USDA loans. USDA is 100 percent financing and often works out to be less costly than FHA with 3 % down!!! One of the benefits to this type of loan is you can finance up to 102 percent of the appraised value of the home. This extra money is typically used for closing costs. However if you have a buyer that is getting a great deal on a fixer upper beware !
You do have to escrow money etc like you do for FHA repair loan. But there is a BIG difference. If the USDA Appraiser feels that a repair is a hazard then the repair must be done BEFORE closing. This can create problems when dealing with sellers or foreclosures.
In the case of a foreclosure the bank is not going to spend anything. If a non foreclosure is involved the Seller may not have the money. This leads to a situation wher the buyer would come out of pocket to make a repair and be rereimbursed at the closing. Does any one see THE potential problem with this ?
USDA loans are great loans and a vital source of financing in Rural areas. So when doing USDA with repairs needed be mindful of a repair that may be considered a hazard and advise your buyer accordingly.