May 3, 2011
FHA loan applicants who find a suitable home and want to buy it must wait out the required FHA appraisal process before a loan can be approved. The FHA appraiser’s job is to make sure the home meets minimum property requirements and to assign the fair market value. The fair market value establishes a baseline for the FHA loan amount and is a very important part of the process.
That appraisal has an expiration date. According to FHA rules, ” Effective for all case numbers assigned on or after January 1, 2010 the validity period for all appraisals on existing, proposed, and under construction properties, including HUD REO appraisals that have an effective date of on or after April 1, 2010, will be 120 days.”
That doesn’t give the borrower long to decide on that property if there’s any doubt remaining once the appraisal is done, but the FHA does make an exception to the 120-day rule. HUD.gov states, “The original appraisal may be extended by 30 days to allow for the approval of the borrower and closing the loan provided the borrower signs a valid sales contract or is approved prior to the expiration of the appraisal.”
But what happens when a buyer purchases a home with an FHA insured mortgage and wants to refinance? Can the original appraisal be used rather than having the home owner pay for a second one?
According to FHA loan rules, there must be a new appraisal for any refinancing. The original appraisal expires when the deal closes. It’s easy to understand why borrowers might think the same appraisal can be used–after all, an appraisal is good for 120 days. A borrower who chooses not to purchase the home after an appraisal moves on to look at other homes, but a new FHA loan applicant could get the benefit of the original appraisal if the timing is right. But once the home is sold, the original appraisal is no longer valid.
FHA rules clearly state; “Appraisals cannot be re-used once the mortgage, for which the appraisal was ordered, has closed. An appraisal used for the purchase of a property cannot be used again for a subsequent refinance, even if the appraisal validity period has not expired. A new appraisal is required for each refinance transaction requiring an appraisal.”
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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