Before your FHA loan can be approved, your buying home must be inspected and appraised. The FHA wants to ensure the home is worth the money you are willing to pay.
The inspection will check the roof is in a good enough condition, the water is drinkable, and many other things.
Most people do not know there are FHA inspection requirements for appraisals.
This FHA selling guide will help you understand the process to prepare you for what will happen.
Lenders require an appraisal to ensure the home's value is worth how much you will pay. With an FHA loan, the Department of Housing and Urban Development also wants to ensure the home is worth the purchase price and check the property's condition.
The home has to pass basic safety and security standards and be in sound condition.
A licensed appraiser approved by the HUD will carry out the inspection. They will ensure the home's structure is sound and that the health and safety of residents aren't at risk.
The appraiser will use a Uniform Residential Appraisal report to ensure the home meets FHA appraisal guidelines. If they find issues with the home, they will list what needs to be fixed before the loan can be approved.
To assess the home's value, it will be compared to similar properties that sold recently nearby.
The report will be sent to the lender with a complete FHA inspection and appraisal. The lender will use the inspection report and appraisal to approve the loan. If the loan is approved, the process can continue to closing.
But if the inspection report isn't favorable, the problems will need to be addressed by the seller before the lender can approve the loan.
If you know what is checked during the inspection, it can help you to make sure the process doesn't take any longer than it needs to.
It should be understood that an FHA appraisal inspection is not the same thing as a traditional home inspection.
The FHA inspector is not nearly as thorough, nor do they perform any outside specialty inspections you may want to be completed.
What is inspected by a licensed inspector is far more involved than an FHA appraisal inspection.
The FHA inspection requirements mean that the appraiser will inspect the important parts of the home, looking for issues. The appraiser will examine the following features of a home:
The structure's condition has to be good enough to keep residents in the home safe and secure. If there are indications that the home sufferers from dampness, pests, decay, or structural damage, it could fail the inspection.
The mortgage lender would require the issues that are flagged to be rectified.
The roof's condition should be good enough to last for at least two or three years. It needs to keep the rain out, but it can’t have more than three layers, or a new roof may be required.
The home should have sufficient heating, aside from locations where winter is very mild. The water heater has to meet local building codes. There cannot be damage to electric boxes or exposed and damaged wiring.
The appraiser will be looking for safety hazards during the inspection. This could be asbestos or even contaminated soil that could be a safety issue for occupants.
It won't pass the inspection if the home is close to a hazardous waste site. The home could fail inspection if the location is noisy, near heavy traffic roads, high-voltage power lines, or oil or gas sources on the property.
If there are problems that are minor and cosmetic, the home should still pass the FHA inspection. Normal wear-and-tear or overdue maintenance shouldn’t be a problem, just as long as it isn’t a safety, or security issue or affects the home's soundness.
So if there is some damage to features in the home, but they still function, it should be fine. For example, cracked windows or countertops won’t need to be replaced if they can still be used.
Most of the time, the reason the home didn’t pass can be fixed. It might mean that the seller needs to repair a few things, but if the problems are considerable, they might want to raise the price to cover the cost.
Though if the damage is too much, or there are serious structural issues, it might be better for the buyer to move on to another property.
Buyers, sellers, and real estate agents must understand the FHA appraisal inspection guidelines.
When an owner wishes to sell their property as-is, buyers must know they will be responsible for any repairs or improvements the FHA requires.
Home sellers should never accept an offer from a buyer with an FHA loan who is unwilling to address any objections from the FHA appraiser.
On the other hand, it would be a significant first-time home buyer mistake to assume a seller is willing to make any requested repairs.
Not fully understanding the situation could be a significant waste of time for all parties involved. Nobody wants to needlessly spend money on inspections or return their home to the market.
Make sure you're on the same page with the seller. Have your buyer's agent confirm with the listing agent the seller's stance on what will happen if the appraiser flags problems. Not doing so would be foolish and a rookie mistake.