January 11, 2018
Does the age of the property affect an FHA mortgage loan transaction? Not all properties are brand new, and in cases where existing construction homes or other property types are being considered for an FHA home loan, age can and often is a factor.
Why is this? It depends on the type of home you wish to buy.
FHA Home Loans For Mobile Homes, Manufactured Homes
FHA home loan rules for mobile homes and manufactured homes carry a requirement that the property be of a certain maximum age.
According to HUD 4000.1, the lender is tasked with insuring that the mobile home was built on or after June 15, 1976, “as evidenced by an affixed HUD Certification Label in accordance with 24 CFR § 3280.11”.
The rules in this section of the FHA loan handbook add that “Manufactured Homes produced prior to that date are ineligible for insured financing”.
FHA Home Loans For All Other Home Types
FHA loan rules are concerned with the age of the home you want to buy with an FHA mortgage because of lead paint hazards associated with properties built earlier than a specific date mentioned in HUD 4000.1:
“If the Property was built before 1978, the seller must disclose any information known about lead-based paint and lead-based paint hazards before selling the house, in accordance with the HUD-EPA Lead Disclosure Rule”.
Unlike FHA loan rules for mobile homes, the “1978 rule” does not prevent the borrower from purchasing a home built prior to the specified date, but the lender is required to take certain steps in these transactions:
“For such Properties, the Mortgagee must ensure that:
-the Borrower has been provided the EPA-approved information pamphlet on identifying and controlling lead-based paint hazards (“Protect Your Family From Lead In Your Home”);
-the Borrower was given a 10-Day period before becoming obligated to purchase the home to conduct a lead-based paint inspection or risk assessment to determine the presence of lead-based paint or lead-based paint hazards, or waived the opportunity;
-the sales contract contains an attachment in the language of the contract (e.g., English, Spanish), signed and dated by both the seller and purchaser:
- containing a lead warning statement as set forth in 24 CFR § 35.92(a)(1).
- providing the seller’s disclosure of the presence of any known lead-based paint and/or lead-based paint hazards in the target housing being sold, or indication of no knowledge of such presence;
- listing any records or reports available to the seller pertaining to lead- based paint and/or lead-based paint hazards in property housing being sold, or indication by the seller that no such records or reports exist;
- affirming that the Borrower received the pamphlet, disclosure, and
records or reports, above; and
-when any agent is involved in the transaction on behalf of the seller, the sales contract includes a statement that the agent has informed the seller of the seller’s Lead Disclosure Rule obligations, the agent is aware of his/her duty to ensure compliance with the requirements of the Rule, and the agent has signed and dated the contract.”
As you can see, the lead paint issue is an important one, and while it does not create a specific prohibition against allowing such a home to be purchased, it does create an extra set of requirements when the property meets the 1978 requirement.
Talk to a loan officer to discuss how these rules may affect your home loan transaction where applicable. State law, building codes, and lender standards may also apply.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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