If you`re looking for a home and considering an FHA loan, one thing to keep in mind is the private road maintenance agreement. This agreement can impact your ability to secure an FHA loan, so it`s important to understand what it is and how it can affect your home buying process.

What is a private road maintenance agreement?

A private road maintenance agreement is a contract between property owners that outlines their responsibilities for maintaining a private road. This agreement ensures that all parties are contributing to the upkeep and repair of the roadway, which can be critical for access to the property.

For example, let`s say you`re interested in a home that`s located on a private road. The road connects other homes in the neighborhood and is not maintained by the city or county. In this case, the property owners have likely drafted a private road maintenance agreement that specifies who is responsible for plowing snow, filling potholes, and other related maintenance tasks.

Why is a private road maintenance agreement important for FHA loans?

When you apply for an FHA loan, the lender will require an appraisal to ensure that the property meets certain standards. One of these standards is that the property must be accessible by a public, maintained road. If the property is located on a private road, the FHA requires that the private road maintenance agreement be reviewed to ensure that it is adequate and enforceable.

If the private road maintenance agreement is not adequate, the FHA may require that the borrower contribute to a fund for future maintenance. In some cases, the borrower may be required to put an amount equal to three years` worth of maintenance into escrow.

What should you do if you`re considering a home on a private road?

If you`re considering a home on a private road and plan to apply for an FHA loan, it`s important to review the private road maintenance agreement and ensure that it meets FHA standards. You may want to work with a real estate attorney or title company to review the agreement and ensure that you understand your responsibilities.

It`s also important to ensure that the private road is in good condition and that the agreement is being enforced. You can do this by talking to other property owners on the private road and observing the condition of the road during your visits to the property.

In conclusion, a private road maintenance agreement is an important consideration when applying for an FHA loan. By understanding the agreement and ensuring that it meets FHA standards, you can avoid delays and potential costs associated with funding an escrow account. With the right due diligence, you can successfully navigate the home buying process and enjoy your new home on a private road.