Who pays what closing costs on USDA Loans?

Closing Costs are handled the same way as any other loan.


Seller is allowed to pay all the closing costs. However, most lenders cap it at 6% of the purchase price.

A 2% funding fee applies but is allowed to be financed on top of the 100% loan.

No mortgage insurance.

Wonderful program. Have any other questions?

Greg is right on. Just a little FYI, you can actually finance into the loan some repairs to the home. There are some restrictions such as the repairs need to be done very shortly after closing (I believe within 15 days) as well as the type repairs. This is rare today.

You have 3 months to complete repairs. It sometimes can be longer depending on the repair and if the weather permits the repair within that time frame. The repairs are usually restricted to only those making the home adhere to the property standards of the program.

Do you know if there has to be a stove and refridgerator in the home during the appraisal to pass for USDA?

I know a fridge is not required, and I don't think the stove is either, but not sure about that.

Neither are required.

I helped a young family buy a home with a USDA loan a few months back. It was a great fit for them.

Whoever would like to answer...are you sure that appliances aren't a "market-specific" requirement?

Here in VA, I've had buyers with all loans except USDA-RD loans and they all require stove/oven, refrigerator, and, dishwasher (built-in) if there's supposed to be one.

Just wondering - I list their foreclosures, but, I try not to do dual agency.

If local or state law mandates it, then it is a requirement, but it is not a USDA requirement. Only applicances that are built into the house would be required. If a person pulls the counter-top mounted stove off the counter in a home they lived in before selling it, USDA will require that it be replaced, or that a new counter top be installed.


As mentioned above, USDA permits you to finance all USDA required repairs up to 100% of the appraised value + the 3.5% funding fee on top. However, many lenders restrict this to only items that cannot be repaired prior to closing due to weather related issues; like a roof replacement in the winter.

Did you know that the seller does not even have to pay closing costs? You can finance those up to 100% of the appraised value too, but most people just have the seller pay them because you won't know the appraised value up front.

But a built-in countertop stove is obvious...I'm thinking a regular, slide-in refrigerator? Regular, slide-in stove with oven? Sorry, it is in Virginia. I see you're Ohio.

USDA guidelines are vanilla when it comes to accepting a homes condition. They follow FHA guidelines. If I were you, I would contact your regional USDA office and ask them to provide you with documentation supporting that neither item is a requirement unless it is a part of the house as in attached to the home.

Use this documentation to fight an appraiser who is not aware of the exact guidelines or a lender who says USDA requires it. I will sift through the thousands of pages in their guidelines and try to get this for you, but it may take me a few days to get to it.

I will just do it now. Here is what I could find in the 4150.2. If the appraiser considers the appliance a part of the home, then it would be contributing to the value of the home. All the appraiser needs to do is place a p on the report and make a comment about no value was given to the appliances.

I, like you, will have to research more - exactly what is real estate and what is personal property. I understand items being "attached" to the property is usually considered real estate, but, I don't consider a plug-in stove or refrigerator really as an attached item.

Like you, I'll look around tomorrow.

I could call the local office. As far as everything else goes, I've always based most conditions on FHA or VA standards to be safe.

I'm working a 100% financing deal right now with a USDA Rural Development Guaranteed Loan.

The Borrower makes nearly $50,000 per year teaching school and has over $400,000 in her 401K . . . . but she's wanting this Zero Down Payment Loan, and it's probably going to fly.

One fly in the ointment is that they're now saying that the H2O test must be for not only E.Coli and Total Coli Form; but it must also test for the presence of Lead, Nitrates and Nitrites . . . . but they don't bother to tell us what the tolerance levels are.

How can you have a test if you don't know what level constitutes a pass and what would be a failure ?

I believe the health department is who will tell you if the levels are safe. Ask them. USDA does not have a set guideline for tolerance levels of bacteria in water.

I know VA, very vague, but it is all up to the appraiser. Everyone is scared and cautious. Look at the vague guidelines and you can see why someone would err on the side of caution.

I did one in VA about 2.5 years back. foreclsure too.

fridge was very frothy and was taken out during the t/o.

seller did do repairs to make the deal work but did not put in a new fridge-(was not asked to).

Possible buyer stuck his own in there without anyone knowing but I do not recall and it was never an issue.

I wasn't asking about bacteriologic criteria; but the mineral tests. I've been doing sales using USDA Loans (Rural Development and FmHA before that) for over 20 years and NEVER had to go beyond a bacteria test for E. Coli and total coliform in the past.

Firstly, we had a successful simple bacteria test back in June.

It's the USDA which is now imposing the test for Lead, Nitrites and Nitrates yet they don't have any criteria for what constitutes a successful test. They just insist on the test being conducted! The State Public Health Dept has NO such requirement!

Our problem today is that the E. Coli and coliform test must be taken from the same sample as the Mineral test, and now, a new bacteria test failed and must be repeated, requiring a more expensive procedure and a utilizing a more sophisticated (really?) laboratory . . . . and more money . . . . a lot more money and the loss of time . . . . plus sanitizing the well and driving a new water 180 miles over to the special lab that did the mineral test, all because the local Hospital's Laboratory only does bacteria tests; even though the bacteria test is all that we now need repeated. Maybe they think this activity will stimulate the economy?

Meanwhile, this ineptness will succeed in killing this transaction. It's only been in the cooker since May.

The investors that purchase the loans have all of these overlays in place, and it is not USDA who is requiring this extra step. Investors are either aggressive or conservative. Most are very conservative right now due to all the losses they have had.

Just to be sure, has this file been fully approved by the lender? Was it then shipped off to USDA for their final review and in this review they requested the additional testing? If not, it is the invester/lender requiring it and not USDA.

I have had investors require this extensive testing in the past, but none that I deal with currently. If the test failed, the water could be un-safe to drink. The house should not create any safety concerns (USDA Rule), so I see why investors would make this a requirement, but at the same time, hardly any go this far with the water.

Everything is in place for a reason. Maybe, the water has been consumed for a long time, and no one has been sick because of it, but if it were a more severe contamination, it could end up being the death of a borrower and another foreclosure which would not stimulate anyone involved.

The lender that I use for these loans has informed me that PMI will be added to the USDA loans starting Oct 1st. Bummer for the buyers

I received an advisory that might be interpreted as an improvement, and that the October 1st, 2011 change REDUCES the PMI one-time upfront fee from 3.5% to only 2%.

Coincidental with the change in the up-front Fee, the program will begin to implement an annual fee of .3% which will probably be added to the mortgagor's monthly payment (an increase of .0025% of the principal) and accumulated in escrow. The Lender must still pay the Fee annually for the life of the Loan.

It just spreads out the cost and should make it a bit easier for 1st time home buyers to get in the door; but is supposed to make the program "Subsidy Neutral".

I can attach a link to this advisory . . . . it's:

USDA Rural Development Administrative Notice 4551