Homebuyers

Planning to Use a 0% Down USDA Loan? What To Know About USDA Appraisals

Buyers hoping to purchase homes outside of big cities often turn to USDA loans for one big reason: These mortgages don’t require a down payment.

U.S. Department of Agriculture (USDA) loans help low- to middle-income buyers in more rural areas and further-out suburbs. Backed by the federal government, they can help first-time buyers looking to purchase their own slice of peace and quiet.

However, USDA loans come with a few caveats. They’re only available in certain areas, and borrowers who use these mortgages must undergo a USDA appraisal on the property they’d like to buy.  

“Aside from the rural area requirements, the biggest thing people need to know about USDA appraisals is their property condition requirements,” said Brady Bell, a rural real estate expert and owner of Bellhaven Real Estate. The requirements are “pretty strict,” Bell added.

Here’s what to know about USDA appraisals and how they compare to traditional home appraisals and home inspections.

What is a USDA appraisal?

USDA appraisals take a close look at the condition of a home. The goal is to make sure it’s priced appropriately and is fit to live in.

To pass a USDA appraisal, a home must be (mostly) move-in ready. This isn’t the mortgage for fixer-uppers in need of floor-to-ceiling renovations.

USDA-approved appraisers check to ensure homes are structurally sound with major appliances and systems in working condition. The buyers need to be able to get in and out of the home on an all-weather or paved road. Any wells or septic systems need to be at least 100 feet away from the home.

Importantly, the property can’t have any income-generating buildings (like silos or livestock facilities) on site.

“Things like chipping or peeling paint, exposed electrical wiring, missing outlet covers, and other distressed property traits can disqualify the home for USDA financing all together,” said Bell.

“If the seller isn’t willing to bring it up to standards, you may not be able to get a USDA loan on the property.”

How are USDA appraisals different from Conventional loan appraisals?

Like other appraisals for government-backed loans, such as those for Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA) loans, USDA appraisals are stricter and more thorough than an appraisal needed for other types of mortgages.

For example, home inspection requirements for a more common Conventional loan are generally more lenient. In comparison, USDA appraisals need to make sure a home meets their minimum property requirements.

This is because the USDA is especially concerned with ensuring that it’s making a sound investment in a home that’s livable and low-risk—not just one that's selling price matches its market value.

USDA appraisals take a little longer than Conventional appraisals, and they need to come from a pre-approved appraiser as well.

They’re also more expensive than other types of appraisals. Typically, appraisals cost between $400 to $600, while USDA appraisals cost a flat fee of $775 in 2024.

Do USDA appraisals require home inspections?

While a USDA appraisal is quite rigorous, it’s still not as involved as a home inspection would be. That’s why it’s always a good idea to get a home inspection in addition to the required appraisal.

The inspection will provide a more comprehensive report of the condition of the home and note needed repairs. That’s instead of just comparing the home against a checklist of property requirements from the USDA.

While paying for both can seem tedious, a home inspection is one of the best ways to make sure you don’t end up with unexpected major repairs once you move in.

However, like USDA appraisals, home inspections can also be used as a negotiating tool when a home is under contract.

If major issues are found in a home’s inspection or USDA appraisal, the buyer can request repairs. Some will negotiate a lower price. If serious problems are found in a home, buyers may choose to back out before it’s too late.