Increased Section 2 Requirements on VA and FHA Loans

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Are you thinking of purchasing a home with a VA or FHA backed loan? Then there might be another important thing you might have to take into consideration: Section 2 items from your Wood Destroying Organisms report. In the past year or so I have noticed an increased requirement of section 2 item on VA and FHA subsidized loans by lenders and underwriters. Although in the past it has been recommended and in occasions required to address these section 2 items (and others included in the report), it is more and more common for lenders to fully require the borrower to address these issues. By making these items a requirement of your loan, that means that you might have to complete additional repair or clear additional areas to satisfy what they are asking from you.

In the case of the borrower completing a refinancing, he is fully responsible for paying any expenses related to resolving those issues. However, if the borrower is purchasing the property then the purchase agreement will usually direct responsibility to either the seller, the buyer, or shared responsibility between these two. The best thing to do in a scenario like this is to talk to the real estate agent or broker in charge f the transaction for further clarification.

But what exactly are Section 2 items on the Wood Destroying Organisms Report (commonly known as the termite report or inspection). You can find a brief explanation on this article: Section 2 Items on Termite Reports. For a quick summary, here are some of the most common items that I am seeing required by lenders for VA or FHA subsidized loans:

• Inaccessible Areas
  • Garage and attic spaces are the most common
• Dead Wood Next to Structure
  • This might be firewood, construction timber, or any other deadwood
• Loose Toilets
  • Common causes are loose nuts or a damaged wax seal
• Water Damage
  • Under sinks and around showers are the most common areas found
• Plumbing Leaks
  • Make sure no active leaks are at your home
• Damaged Stucco
  • This may give pests and moisture a way to get in. However, many times it can be easily repaired with a stucco patch
• Water Stains
  • A very common cause of this can be missing gutters on the exterior, but it could as well mean roof or plumbing leaks, or any other problems that could exist

Do you need assistance with getting your property certified for your VA or FHA subsidized loan? Give us a call at (619) 421 – 2101 or send us a message and our experienced team will do everything possible to assist you. With over 10 years of experience handling these types of transactions, we have the knowledge necessary to resolve most problems and situations that could arise.