Buying a Foreclosure with a USDA Mortgage

by Keith Landis on March 3, 2014

I had a buyer ask me the other day…

Can I buy a foreclosure using a USDA Mortgage in Pennsylvania?

Yes, you can. The USDA does allow home buyers to use the USDA Mortgage Program to purchase foreclosed properties but there are some issues that should be noted.

The USDA will require that the property meet minimum property guidelines. This means that if any repairs are needed, the underwriter will require that these repairs be made prior to closing. When a needed repair pops up on seller owned properties they are often willing to make the repair in the interest of keeping the sale moving forward.

Foreclosures by definition are bank owned properties, banks will almost never make any property repairs after a sales contract is signed and prior to a closing. They will only sell these properties “as is” which essentially means “take it or leave it”. In order for a property to meet minimum property, the property must be free of defects. Typical defects that pop up during the home appraisal include: chipped paint for homes older than 1978, broken windows, missing handrails on stairs, foundation or roof issues, mold or pest damage.

Yes, you can purchase a foreclosure using the USDA Mortgage program. Just make sure the property is in good condition.

USDA Mortgage Highlights
•100% financing with no down payment
•seller paid closing costs and/or closing costs financed can result in no cash due at closing
•interest rates are as low as the other major mortgage programs
•property must be in USDA eligible area

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