Differences between FHA, VA, USDA, and Conventional Loans for Private Road Properties
You found the perfect home, but the property is located on a private road. How do loans for private road properties differ between mortgage programs? How can a property located on a private road affect your loan approval?
When a property is located on a private road, there are important steps that need to be taken to help secure financing. However, there are also differences between private road requirements for each loan program – FHA, VA, USDA, and Conventional.
Be sure to download our FREE Comparison Chart that compares FHA, VA, USDA, and Conventional loans in one convenient side-by-side chart.
Private Road Financing 1-2-3
No matter the loan type, it is always good practice to follow the below steps when the property you are interested in purchasing is located on a private road:
- Call your local county roads & bridges department to confirm the type of road classification your property sits on.
- If it is a private road, ensure that the lender, bank, or broker handling the mortgage is experienced with private roads and can easily and properly determine what loan program is available for you.
- If required, be sure to follow up with the closing attorney or title company handling the transaction to determine:
- Are there recorded easements?
- Is there a recorded maintenance agreement? (See below on whether this will be a requirement based on the loan program.)
The MAJOR distinction between a private and public road is that a private road is maintained at the expense of the property owner and not the public. Do not assume that because a road is dirt or unpaved that it is a private road since there can be a variety of classifications for road types, so be sure to double check and follow step 1 above.
Special Requirements by Loan Type:
Once you have completed steps 1 through 3, it is important to note the requirements of each loan type.
- Conventional Loans: Fannie Mae will require a private road maintenance agreement, but Freddie Mac guidelines do not. Check with your lender if they can work with Freddie Mac programs.
- VA Loans: Requires a recorded maintenance agreement but this can be waived with VA approval.
- FHA Loans: Do NOT require a private road maintenance agreement.
- USDA Loans: Do NOT require a private road maintenance agreement
Note: Additional criteria will apply for private roads under both FHA and USDA loans such as the requirement to be protected by permanently recorded easements.
Whether you are looking at a USDA loan, FHA loan, VA home loan, or a Conventional loan, be sure to call our office to discuss your individual scenario.
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