P.S. Remember, with a USDA loan, you can finance up to 100% of the appraised value (not including guarantee fee) so if your appraisal comes in higher, ask you lender to finance as much as your closing costs as possible into the loan.
In many cases bank owned property have problems passing USDA or FHA property standards. Because of this, I see many bank owned properties using FHA 203k Rehab loan. It allows you to get the money to purchase the home and also make the necessary repairs to the property. Those repairs can include repairs or improvements to the Septic. Check out http://www.Ohio203K.com for information on the FHA 203k loan.
Again, from experience the asset managers of Bank Owned properties will typically only pay up to 3% of the Purchase Price towards your closing costs. USDA and FHA permit them to pay a higher amount, however it is difficult to get them to pay more that 3%. Ask your Realtor for guidance.
Like, Trevor from what you have said, I would have some concern about your prediction of an upcoming layoff. If you want to discuss this further, you are welcome to contact me.
With regards to a property inspection for the appraisal on a USDA loan, the appraisal conditions will be similar to FHA appraisals. That is:
-The appraiser is not an engineer/home inspector: you and your fiance should have a Certified Home Inspector inspect the property to determine if there are any issues with the home.
-The appraiser will follow certain "Health and Safety" guidelines when inspecting the property. If any issues arise on the appraisal inspection these will need to be repaired/resolved by the Seller prior to closing.
-The appraiser is there to determine market value and livability of the home.
I have some concerns about your statement, "He...will be looking at lay off here in a few short weeks." If this is a normal seasonal employment occurrence, then I am wrong about my concern. But if it is not, then you may want to reconsider purchasing a home at this time.
As for closing costs, the USDA program allows you to negotiate with the Seller a "concession" to include some or all of your closing costs in the purchase price.
But here's the best answer I can provide for your question: get a referral to a local Mortgage Banker. Mortgage Bankers in your community will provide you with a much higher quality of service and financing options than any "Big Bank." Local Mortgage Bankers have long been the source of excellent financing options for homebuyers. Further, Loan Originators who work at Mortgage Banks are LICENSED whereas Loan Originators who work for the "Big Banks" are only REGISTERED. There's a BIG difference.
Sit down face to face with your Mortgage Banker to be thoroughly prequalified. The Mortgage Banker will review all facets of your loan request to answer your questions with regards to the appraisal concerns you have for this property purchase.