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Does a private or public road make a difference on a USDA loan?

January 27th, 2017 by Sean Stephens

Do you ever check if a road is public or private for loan qualifying?

This topic is often a point of confusion, and in today’s video I will explain why it is more important to know if a road is classified as public or private than if it is dirt, gravel, or paved.

By the way, don’t forget to download our USDA Blueprint for Success with the link below, this complimentary guide is designed to walk you through the USDA qualifying process step-by-step and is ideal for both homebuyers and Realtors alike.

USDA Guidelines require that streets and roads must be hard surfaced or all-weather surfaced.  They define an “all-weather surface as a road surface over which emergency and the area’s typical passenger vehicles can pass at all times.”

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USDA guidelines also provide that “A publicly maintained road is automatically assumed to meet this requirement.”

Another important point of clarification is that USDA guidelines do not always require a private road maintenance agreement when a property is located on a private road.

Now that we have reviewed the guidelines, let’s discuss how a private or public road makes a difference on a USDA loan:

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Step 1.  It is always recommended to contact your local county roads and bridges department go confirm the exact type of road classification.

It is important to remember that even if the property is located on a dirt road, don’t assume that it is also considered a private road.  Many counties have different road type classifications and it is always best to make the call and double check.

Step 2. Next, if it is determined that the road or street is private, then the following USDA guidelines are required for private roads or streets:

  1. Either must be protected by a permanently recorded easement, or
    • All recorded easements must be reviewed and approved by the approved USDA lender’s underwriter and documented
    • All recorded easements must be reviewed and approved prior to closing.  Your title company or attorney handling the closing can help with easement questions.
    • For further understanding, here is a definition of an Easement from Wikipedia.
  2. Be maintained by a Homeowner’s Association (HOA)
    • If a Homeowner’s Association (HOA) is responsible for maintaining the streets and roads, it must meet the criteria set forth by Fannie Mae, Freddie Mac, the U.S. Department of Housing and Urban Development (HUD), or U.S. Department of Veterans Affairs (VA).

In summary, do not always assume just by the road type that it may be a private road.  Always check with the county where the property is located to get proper street classification on whether it is actually public or private.

As we all know, different factors can evolve on each transaction, but this will give you a great start towards understand why a private or public road makes a difference on a USDA loan

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