While mulch around the foundation of your home may look appealing, giving it a well-groomed appearance, it can cause some unexpected problems if not done with the proper care. The main reason for placing mulch is its ability to hold in moisture and insulate against colder temperatures. If mulch must be used around the home's foundation, using inorganic mulch would reduce potential problems.
Wood-based mulches placed near a home's foundation could attract termites. If termites are already present, the wood mulch would give them further nesting grounds in which to cause havoc. Wood and other organic-based mulches hold in the most moisture, and termites require moist areas in which to thrive.
Organic mulch created from trees and other plant life could harbor unseen pests and insects such as centipedes, millipedes and pillbugs, which thrive on the moisture sucked in by the mulch. While these type of creatures won't cause damage to the structure of the home, they can still create an infestation.
Artillery fungus is a disease often found in dead or rotten wood, and because this type of wood is ground up into mulch, the fungus spores can get into your home. This type of fungus spreads quickly and reproduces even more quickly when introduced to cool, moist environments. Other fungi and mold also breed under the moist conditions created by the organic mulch. When you try to combat such problems with fungicides, it often clings to the mulch and doesn't penetrate to the soil where it is needed most.
If you want to use any type of mulch around the foundation of your home, it is best to place a layer of bricks or stones between the home's foundation and the mulch to keep the two from making contact. This has the added benefit of placing a barrier between the foundation and any critters that may try to enter your home. For aesthetic purposes, you can use inorganic mulch such as gravel or rocks in place of organic mulch.