Minneapolis, MN: When buying a home that has a well or septic system, additional consideration are necessary in relation to the current conditions of the water well and the waste water septic system. Needless to say, it is rather important that both of these systems are functioning properly and in good working condition, as repairs to these systems can very quickly become expensive. I personally have had both a well and septic system for over 25-years, so I can speak both from person experience, and from a lender perspective. I strongly recommend all homebuyer demand the seller prove a third party certification of a properly functioning septic system, and a water test to determine the quality of the water, and if there is an contamination.
Some mortgage loan programs require tests on these system before you can close on the home, while others do not. Here is a quick review of current popular program requirements:
FHA backed home mortgage loans ALWAYS REQUIRE both a well and septic test. Furthermore, the well and septic system must meet certain conditions. For example:
VA homes loans do NOT require a septic system test, unless as noted under the conventional guidelines, a system problem is noted.
VA home loans ALWAYS require a water test. See "water test requirements' below.
USDA Rural Housing Loans follow FHA loan guidelines
When doing a septic system certification, the system may comeback as failing, but the mortgage industry generally divides a 'failing' system into two categories. Failing compliant, failing non-compliant. Failing Non-Compliant: This means the system, is totally failing right now and is not usable. This category always means the system MUST be repaired PRIOR to any loan closing. The exception being rehab loans, like an FHA 203k, but in this case, the failing septic system MUST be part of the repair work. Failing but Compliant: This typically means the system is currently functioning correctly, but is no longer compliant to current local septic guidelines. For example, when I bought my house, I fit this situation because the septic tanks were made of cement, and the current local code mandated the tanks be plastic. Failing but compliant system usually DO NOT need to be repaired before closing, but local ordinance typically will require the new owner to update the system within a short time frame The most common timeframe is within one year of closing.
