Termite Inspection & Closing Disclosures

AZ Mortgage Rules – Termites

Termites can cause trouble when they creep into a Phoenix area home.  Believe it or not, the charges to treat those Arizona pests can cause even more damage when they creep onto the a buyer’s settlement statement or HUD!  In today’s world of over analytical mortgage underwriters and tighter home loan guidelines, the fact that a charge for a termite inspection shows up on a settlement statement can open up a can of worms or in this case Reticulitermes flavipes (aka “termites”) at closing.

Why Does an Underwriter Care About Termite Report Fees?

Various mortgage guidelines view termites differently.  Learn more about how each different Phoenix AZ Home Loan views termites and termite reports.  In short, no matter what kind of loan a buyer is using the presence of termites can cause mortgage issues.  Investors that provide the capital and write the rules for mortgages do not want to lend their money on a home  that could potentially have major structural damage due to termites down the road.  If an underwriter sees that a charge for a termite treatment is on the buyer’s settlement statement they reserve the right to ask for a copy of the termite report to verify that the creepy pests were eliminated and that there are no further termite related issues with the property.

The challenge is that if the termite report does not meet the lender’s guidelines, the buyer does not pass go and they do not collect $200 (nor do they get the shiny keys to their new home).  This can cause costly closing delays and further required property repairs.  Keep termite inspections out of escrow and off the HUD.  Typically the only time an Arizona mortgage lender will ask for a termite report is if the appraiser notes active termite damage or if the buyer is utilizing a VA mortgage in which case a termite report must always be provided.

Please let me know if you have any termite related questions!



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