A termite inspection—more accurately called a wood-destroying insect or WDI inspection—can be an important part of buying a home. But whether the inspection is actually required for the mortgage depends on the loan program, the property and sometimes what is discovered during the appraisal or inspection process.
This distinction is important because a homebuyer may choose to have a termite inspection even when the mortgage itself does not require one.
Are Termite Inspections Required for a Mortgage?
Not always.
For many conventional mortgage transactions, a termite inspection is not automatically required simply because someone is buying a home.
However, a termite or other specialized inspection can become necessary if the appraisal identifies evidence of wood-destroying insects, suspicious damage or another condition that requires further evaluation.
Requirements can also vary by loan program. VA loans are particularly important here because wood-destroying insect requirements apply throughout Maryland, Washington DC and Virginia.
Termite Inspections and VA Loans
For properties in Maryland, Washington DC and Virginia, VA generally requires wood-destroying insect information as part of an applicable VA purchase transaction.
There is an important exception for certain condominium units.
A wood-destroying insect inspection generally is not required for units in low-rise or high-rise condominium buildings where the units are vertically stacked, unless the appraiser identifies a potential infestation problem.
Site condominiums, villas and townhome-style condominiums where the units are not vertically stacked are treated differently. In applicable termite areas, an inspection generally is required unless acceptable evidence of a treatment guarantee has been provided by the homeowners association.
In other words, the condo exception is not simply based on whether a unit is on the first, second or third floor. The type of condominium construction matters.
What About FHA and Conventional Loans?
A termite inspection is not automatically required on every conventional or FHA purchase.
However, evidence of infestation, wood damage, decay or another suspicious condition can cause additional inspection, treatment or repair requirements.
An appraiser is not performing a complete termite inspection. But if an appraiser observes something that could affect the property’s safety, soundness or structural integrity, additional evaluation by an appropriately qualified professional may be required.
What Happens If You Get a Termite Inspection Even Though the Loan Doesn’t Require One?
This is where homebuyers and real estate agents sometimes get surprised.
A buyer may elect to obtain a termite inspection even though the mortgage program does not require one.
If the termite inspection is being paid through settlement and the charge appears on the Closing Disclosure, our lending process requires us to obtain a copy of the termite report for the mortgage file.
Once the lender receives the report, the findings can become relevant to the mortgage transaction.
If the report is clear, there may be nothing further required. But if the report identifies active infestation, treatment recommendations, wood damage or possible structural concerns, additional documentation or corrective action may be necessary before closing.
What If the Termite Report Shows Active Infestation?
If the report indicates active wood-destroying insects or recommends treatment, the lender may require evidence that the appropriate treatment has been completed.
Depending on the circumstances, that could include documentation from the pest-control company showing that the property was treated and the applicable condition was addressed.
This can become particularly important when an inspection takes place shortly before settlement. Waiting until the last minute can create a closing delay if treatment or additional documentation is required.
What If the Termite Report Shows Wood Damage?
Evidence of damage can require more than simply treating the termites.
The next step depends on the nature and severity of the damage.
Minor damage may require repairs and documentation showing that the affected area has been properly corrected. Depending on the circumstances, a reinspection or other verification of the completed repairs may also be required.
If the damage appears significant or raises questions about the structural integrity of the property, additional evaluation may be necessary.
For example, the lender may require an inspection or written evaluation from an appropriately qualified professional. In more serious situations, that could include a structural engineer who can determine whether the damage has affected the structural integrity of the home and identify any necessary repairs.
The important point is that there is not one universal response to every termite report. A small area of old damage and evidence of potentially serious structural deterioration are very different situations.
What If the Buyer Pays for the Termite Inspection Directly?
There are also situations where a termite inspection is not required by the mortgage and the buyer independently orders and pays for the inspection directly.
If the inspection is not a loan requirement, is paid directly by the buyer rather than through settlement, and the report is not otherwise provided to the lender, the inspection may never become part of the mortgage file. In that situation, the lender may not even know that a termite inspection was performed.
That is different from an inspection charge appearing on the Closing Disclosure. If the inspection is being paid through closing, our lending process requires us to obtain the report.
This should not be interpreted as advice to conceal a known property problem from a lender. Borrowers should provide any information or documentation required by their loan program, lender or purchase transaction.
Why Timing Matters
A termite problem does not necessarily mean that a mortgage cannot close.
Many termite issues can be treated or repaired without creating a major problem for the transaction.
The bigger problem can be discovering an issue immediately before settlement.
If treatment is required, wood damage needs to be repaired, a contractor needs to evaluate an affected area, or a structural engineer is needed, completing everything at the last minute can potentially delay closing.
For this reason, buyers and real estate agents should let the loan officer know when a termite inspection is being performed, particularly when the inspection is required by the loan program or will be paid through settlement.
A Clear Termite Report vs. a Problem Report
The mortgage implications generally depend on what the inspection reveals:
- No visible evidence of wood-destroying insects or damage: Generally no additional termite-related action is necessary unless another requirement applies.
- Active infestation or treatment recommended: Treatment and evidence of completion may be required.
- Wood damage: Repairs, additional documentation and/or reinspection may be required depending on the extent of the damage.
- Potential structural damage: Additional evaluation by a qualified professional, potentially including a structural engineer, may be required before the property can be determined acceptable for financing.
Termite Inspections Are Different From Home Inspections and Appraisals
A termite inspection, home inspection and mortgage appraisal serve different purposes.
A home inspector evaluates the property’s overall condition for the buyer. A termite or WDI inspector specifically evaluates the property for evidence of wood-destroying insects and related damage. The mortgage appraisal provides an opinion of value and evaluates the property for applicable mortgage property requirements.
One inspection does not necessarily replace another.
Talk to Your Loan Officer Before Closing
If you are buying a home in Maryland, Washington DC or Virginia and a termite inspection is being performed, it is a good idea to discuss it with your loan officer early in the process.
We can determine whether the inspection is required for your particular mortgage, whether the report needs to be included in the loan file and what documentation may be needed if the inspection identifies treatment or damage.
Handling those questions early can help prevent a relatively manageable termite issue from becoming an unexpected problem immediately before settlement.
Questions about a termite inspection and your mortgage?
Call or text me at 240-670-5090 or email me at CJMT@mainstreethl.com.
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