June 19, 2015
We field many questions about FHA home loans. Some of those questions have to do with a borrower’s appraisal process and whether certain conditions will cause the home to pass or fail an FHA appraisal.
One variation on the types of questions we get concerning appraisals goes like this: “We are buying an a home that failed initial appraisal for small repairs. We made repairs to X, Y, and Z, but had to make the repairs to one area as a make-do or temporary fix. Will this pass the re-appraisal?”
There are several issues at work here. The first is correcting a misconception about the appraisal process itself. When a home gets appraised for an FHA loan and corrections or repairs are listed which must be made as a condition of loan approval, in most cases a compliance inspection is required to prove said repairs/fixes were made. The home will not get re-appraised or re-valued in the compliance inspection.
Secondly, FHA loan rules do include FHA minimum property standards for loan approval, but state and local building codes also apply. The FHA minimums aren’t the only standards which must be met, and the FHA does not keep copies of all state/local building code on file as a reference. In many cases if a home requires repairs or corrections the local authority may have jurisdiction, so a borrower would need to discuss their issues with someone who knows state/local code.
Any required corrections or fixes made to the property as directed in the appraisal report must be done to the satisfaction of the applicable codes or ordinances. What is “up to code” in one area may not be acceptable (or may exceed the requirements, depending on circumstances) in another.
Some conditions cannot be fixed–a home located within a certain proximity to high voltage easements or other restricted areas may not be deemed suitable for an FHA mortgage loan.
But when repairs and corrections can be made to bring the home into acceptable status, it’s up to the borrower to decide if the corrections are worth the effort. That effort often includes researching the applicable building codes to see how such corrections must be made.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section. All comments are held for moderation.
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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