February 28, 2011
There are two costs an FHA borrower pay when purchasing a home with an FHA insured mortgage. One is required, the other is optional, but FHA loan applicants should count on paying for both to insure the best possible experience with the new home. An FHA appraisal is the mandatory expense buyers must pay when trying to buy a house with an FHA mortgage. The FHA must determine the property meets FHA standards for safety, longevity, and other factors before it will insure the loan.
Appraisals are designed to assign the fair market value of the home. While the appraisal is meant to insure the home is safe and livable, it is not considered an inspection and does not pretend to be a comprehensive look at all features of the home. Just because a property has been approved for an FHA guaranteed loan does not mean it is free from defects or problems.
That’s where the second expense–the optional one–comes in. Borrowers have the right to hire a home inspector to examine the property for defects or problems, and must do so at their own expense. In spite of the fact that the inspection must come out of the buyer’s own pocket, the inspection is a very important part of the process of buying a home. You may spend hundreds today on an inspection, but doing so can literally save you thousands of dollars later on.
A home inspector’s job is to look at all aspects of the property and make an impartial determination. That’s one reason why it’s best that the buyer is the one to pay the fee–there is no conflict of interest on the inspector’s part. The inspector’s job does not include assigning a market value of the home or determine how marketable the property may be in the future. Your inspector should provide you with a written report indicating any problems that need addressing, the potential lifespan of features in the home, and note the state of the electrical system of the home and other important details.
Another major difference between inspectors and appraisers is where they come from. The FHA has a list of agency-approved appraisers it may draw from to get the job done. The buyer must find a qualified inspector through the phone book, recommendations from a real estate agent, local professional associates or even the state authority for licensing inspectors where applicable.
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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