April 11, 2015
A reader asks, “My follow up question is that I believed that there would be an FHA inspection done and if serious problems or defects are found then the seller would be required to fix the issues. I realize FHA does not “check” for everything so a home inspection is still in order, but has this rule changed?”
This is a follow-up to our answer to this reader’s question in our April 3, 2015 post, “Is A Home Ever ‘FHA Approved'” where we answered the original question as follows:
“…there is one serious issue raised here that we MUST address–the prevailing misconception some borrowers have that the FHA or HUD would ever ‘approve’ a home. Some borrowers mistakenly assume that because a home passes the appraisal process that it is free of defects.
This is NOT TRUE.”
The reader’s second question, about the “FHA inspection”, makes it seem clear that the idea of an FHA appraisal is still misunderstood. There’s no such thing as an “FHA inspection” of the home. Instead, an appraisal is done by a professional. That person’s job is twofold–establish the fair market value of the property, and insure the property meets minimum FHA standards.
The word “minimum” is key here–the appraiser will not step out onto the roof, and is not required to be an expert in electrical systems, plumbing, etc. The appraiser is given a set of guidelines to make sure there are no glaring or obvious defects or hazardous conditions. Where such may exist and are noted, corrective actions must be taken as a condition of loan approval.
But a home inspector–who must be hired and paid by the borrower–would do a far more complete once-over of the home to find problems if they exist. The appraisal will never do more than set the value and make sure minimum standards are met. That is what all borrowers should keep in mind when purchasing a home. The home that “passes” the FHA appraisal process is not necessarily defect-free and the borrower should never assume that it is–a home inspection is one of the most important parts of the home buying process.
Do you have questions about FHA home loans? Ask us in the comments section.
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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