November 23, 2015
FHA loan rules covering minimum property requirements (for all homes to be purchased with a single-family FHA loan) are found in HUD 4000.1. The topic of water supply to the home is one that frequently comes up when borrowers or soon-to-be FHA loan applicants look at homes that are serviced by wells or other “alternative” types of water supply other than a public utility.
What do FHA loan rules have to say about the water supply to the home? HUD 4000.1 begins by stating:
“The Mortgagee must confirm that a connection is made to a public or Community Water System whenever feasible and available at a reasonable cost. If connection costs to the public or community system are not reasonable, the existing onsite systems are acceptable, provided they are functioning properly and meet the requirements of the local health department.”
Note that this language is fairly general–state or local laws/building code/etc. may and often do apply above and beyond this.
For properties that are served by wells, FHA loan rules state:
“When an Individual Water Supply System is present, the Mortgagee must ensure that the water quality meets the requirements of the health authority with jurisdiction. If there are no local (or state) water quality standards, then water quality must meet the standards set by the EPA, as presented in the National Primary Drinking Water regulations in 40 CFR 141 and 142.”
As you can see, FHA loan rules depend heavily on the local ordinances in this area, or federal law where no local guidelines exist. Well water brings up a variety of other potential side issues–something as simple as pest control (as required by FHA loan rules or state/local ordinance) may be affected by the presence of a well on the property.
From HUD 4000.1: “Soil poisoning is an unacceptable method for treating termites unless the Mortgagee obtains satisfactory assurance that the treatment will not endanger the quality of the water supply.”
And what about situations where a property is served by a shared well? FHA loan rules discuss this at length:
“The Mortgagee must confirm that a Shared Well:
–serves existing Properties that cannot feasibly be connected to an
acceptable public or Community Water supply System;
–is capable of providing a continuous supply of water to involved Dwelling Units so that each existing Property simultaneously will be assured of at least three gallons per minute (five gallons per minute for Proposed Construction) over a continuous four-hour period.
(The well itself may have a lesser yield if pressurized storage is provided in an amount that will make 720 gallons of water available to each connected existing dwelling during a continuous four-hour period or 1,200 gallons of water available to each proposed dwelling during a continuous four-hour period. The shared well system yield must be demonstrated by a certified pumping test or other means acceptable to all agreeing parties.);
–provides safe and potable water. An inspection is required under the same circumstances as an individual well. This may be evidenced by a letter from the health authority having jurisdiction or, in the absence of local health department standards, by a certified water quality analysis demonstrating that the well water complies with the EPAs National Interim Primary Drinking Water Regulations;
–has a valve on each dwelling service line as it leaves the well so that water may be shut off to each served dwelling without interrupting service to the other Properties; and
–serves no more than four living units or Properties.”
FHA loan rules in this area may be supplemented by state or local requirements that must also be observed.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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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