Termite Inspection & Closing Disclosures

AZ Mortgage Rules – Termites

Termites cause trouble.   In fact, these unwelcome critters cause problems with the home as well as a home loan.  Believe it or not, termite treatment charges cause damage when they creep onto a home buyer’s settlement statement (or “Closing Disclosure”).

Termite Charges Create Damage Too!

Analytical and detail oriented home loan underwriters scour the landscape of final documents for a termite treatment charge.  The presence of such a charge might open up a can of …. well Reticulitermes flavipes (aka “termites”).

Various mortgage guidelines view termites differently.  In short, regardless of loan type the presence of termites can cause mortgage issues.  Investors behind each loan frown upon funding a home that is vulnerable to major structural damage due to termites.

When underwriters see termite charges on the buyer’s settlement statement they reserve the right to ask for a copy of the termite report.   The goal – to verify the creepy pests were eliminated and no longer pose a threat.

Termite Report Fees & Untreated Damage

However, challenges arise when the termite report reveals untreated termite damage.   In such a case, the buyer does not pass go and they do not collect $200 (nor do they get the shiny keys to their new home).  Keep termite inspection charges off the Settlement Statement if possible.

Typically the only time an Arizona mortgage lender asks for a termite report is when appraisers note active termite damage.  In addition, termite reports are typically required on VA home loans (depending on the region of the Country).

Jeremy

 

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