June 3, 2011
As stated elsewhere in this blog, the appraisal process is one of the most important parts of the FHA home loan process.
A borrower (and the lender) learns about the general state of the property and its fair market value thanks to the FHA appraisal, and once that process has been completed the FHA loan process can move forward and a buyer can offer a commitment to purchase the property.
Due to the ever-changing nature of the housing market, FHA appraisals have an expiration date–the appraisal is not good indefinitely. What happens if for some reason the buyer delays in committing to the purchase of the home, or otherwise runs the risk of having the deal close after the appraisal has expired? Does the buyer have to pay for a new FHA appraisal? In many cases, the FHA has anticipated this situation and offers an option to the buyer.
FHA rules covering a conditional commitment allow a borrower to extend a conditional commitment under the right circumstances. Can you extend your conditional commitment? The FHA official site says, “For existing homes, if a sales contract is signed or the borrower is approved for a loan prior to the appraisal expiration date, the appraisal term may be extended by the lender for 30 days to allow for loan closing.”
There are additional requirements. When a borrower has been approved and FHA Loan form HUD-92900-LT (FHA Loan Underwriting and Transmittal Summary) has been signed, the loan “must close within 150 days”. That, according to the FHA, includes a “120 day validity period for original report plus 30 day extension” in cases where an FHA appraisal has not been “updated with an Appraisal Update Report”.
In cases where the FHA appraisal has been updated, the loan must close within 240 days, which includes a “120 day validity period plus 120 day validity period for the Appraisal Update Report.”
In these cases, the FHA assigned appraiser is required to complete a Market Conditions Addendum that reflects current market conditions as of “the effective date of the Appraisal Update Report.” FHA rules add that a 30 day extension is not allowed when the original appraisal is updated with an Appraisal Update Report and that the appraisal can only be updated once by using the Appraisal Update Report.
Ask your lender if you’re concerned about your FHA appraisal expiring prior to loan closing and what needs to be done to request an extension if that’s the case.
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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