May 19, 2015
A reader asks, “I am in the process of buying a home using a fha loan. The house that we are buying has a cracked foundation and the seller has already had it repaired and the repair has a lifetime transferable service and warranty. With it having had a repaired foundation will this pass the FHA minimum property standards? We have an appraisal in about a week and I am terrified its going to kill the deal.”
Unfortunately it’s impossible to say whether a foundation repair job would bring the foundation up to minimum property requirements or state/local building code. Without inspecting the foundation, giving such a determination would be iffy at best.
The important thing to remember is situations like these is that FHA loan standards aren’t the only rules on the books that affect a transaction in these areas. State and local building code or other applicable rules may also have a say–FHA loan minimum property standards never override the state or local building code–the home must be acceptable to the local authority, too.
The appraisal process will be important in this transaction; the FHA appraiser will determine whether or not the foundation in its current state is acceptable. If it is not acceptable, it’s up to the appraiser to determine if repairs or corrections are realistic. If so, the appraiser may permit the transaction contingent on those repairs or corrections being made. In other words, the buyer must (in most cases) have the corrections made prior to closing.
In some cases where minor corrections are required, there may be an option to finalize the repairs after loan closing, but this would be handled on a case-by-case basis. The borrower would need to discuss the situation with the lender to learn what might be possible.
Borrowers who have appraisals with corrections required will most likely have to pay for an additional compliance inspection to insure the fixes were made to the satisfaction of the appraiser–something good to know when budgeting for your home purchase.
Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for review.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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