Can you qualify for a USDA loan when the property is located on a private road?

How do you qualify for a USDA loan when the property is located on a private road?

This is one of the most common questions that I receive when working with USDA loans. Private roads can be found in very rural areas, but also in communities controlled by an HOA (Homeowner’s Association).  Don’t be scared when you come across a private road – be aware! In today’s video tip we will cover the USDA qualifying guidelines when dealing with private roads.

USDA loan 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.”

A very key point that has been clarified in the new USDA 3555 guidelines states “A publicly maintained road is automatically assumed to meet this requirement.”

Another important point of clarification is that USDA loan requirements and guidelines do not require a private road maintenance agreement.

Now that we have defined the guidelines, let’s walk through the steps on how to qualify for a USDA loan with a property located on a private road:

Step 1.  It is always a good idea to confirm with your local county roads & bridges department the exact type of road classification.  Just because it may be a dirt road, don’t assume that it is also considered private.  Many counties have different classifications of road types and it is always best to make the call and double check.

Step 2. Once determined that the road or street is private the following USDA private road guidelines are required:

1. Private streets must have a permanently recorded easement, or
2. Be owned and maintained by a Homeowner’s Association (HOA)
3. Don’t forget, the private road must also meet the all-weather surface requirement

If a HOA is responsible for maintaining 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).

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.

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 to staying organized with the steps needed to qualify for a USDA loan when the home is located on a private road.