Is a Termite Inspection Required for a Conventional Loan?

Conventional loans are a common financing choice for many homebuyers, differing from government-backed options like FHA or VA loans as they are not insured or guaranteed by federal agencies. The property’s condition significantly influences the appraisal and the lender’s decision.

General Conventional Loan Requirements

Conventional loans generally do not impose a universal requirement for a termite or wood-destroying insect inspection. Unlike certain government-backed mortgage programs that often mandate such inspections, conventional lenders focus primarily on the borrower’s financial stability and the property’s appraised value.

Lenders are primarily concerned that the property serves as adequate collateral for the loan amount. This means the home must meet certain minimum property standards to ensure its marketability and structural soundness. While a specific pest inspection is not usually a standard prerequisite, the overall condition of the property remains a significant consideration for approval.

Situations Requiring a Termite Inspection

While not generally required, a termite inspection may become necessary for a conventional loan in several situations.

If an appraiser observes visible signs of current or past infestation, wood-destroying insect damage, or other structural concerns during their valuation, they will flag these issues. This observation will likely prompt the lender to mandate a professional inspection before loan approval.

Individual lenders may also implement internal policies, known as “overlays,” requiring termite inspections. These policies might apply to properties in areas with high pest activity or to homes meeting specific criteria like age or construction type.

Furthermore, the purchase agreement between the buyer and seller can stipulate a termite inspection as a contingency for the sale. This agreement-based requirement is binding regardless of lender demands.

Addressing Inspection Outcomes

When a termite inspection is conducted, the resulting report details any findings related to wood-destroying insects. This report typically indicates the presence of active infestations, evidence of past activity, and the extent of any damage caused. It also often includes recommendations for treatment and repairs.

If active infestations or significant structural damage are identified, lenders will typically require remediation before the loan can be finalized. This usually involves professional pest treatment and any necessary repairs to compromised structural components. Loan approval is often contingent upon these issues being fully resolved to protect the collateral.

Following treatment and repairs, a re-inspection is often required to confirm that the issues have been successfully addressed. Unresolved infestations or unrepaired damage can significantly delay the loan closing process. In some cases, if the issues are extensive or remediation is not feasible, they could even jeopardize the loan’s approval.

Cost and Payment Responsibility

The responsibility for covering the cost of a termite inspection is not universally fixed and often depends on negotiation between the buyer and seller. If the buyer initiates the inspection as part of their due diligence, they typically bear the cost, allowing them to assess the property’s condition independently.

Conversely, the seller may agree to pay for the inspection, especially if it is a condition stipulated in the sales contract or if the lender specifically requires it for loan approval. The decision of who pays is a common point of negotiation during the drafting of the purchase agreement.

The cost of a professional termite inspection generally ranges from approximately $75 to $150, though this can vary based on the property’s size, location, and the specific services included. While this fee is relatively modest compared to other closing costs, it is an important consideration in the overall transaction.