April 15, 2024
The difference between an FHA appraisal and a home inspection is a serious issue.
Borrowers applying for an FHA mortgage to buy a home must have an FHA appraisal to ensure that the property meets minimum standards.
But when a home passes the appraisal process or allows the loan to go through as long as required corrections are made, does that mean the property has been inspected and approved by the FHA?
Not according to the FHA official site, which says an appraisal is never a guarantee or endorsement of any kind. Borrowers should know that the purpose of the appraisal is to establish the home’s fair market value and ensure that the home meets the minimum standards.
However, the appraisal is not intended to discover any/all issues with a home, and borrowers should never commit to purchasing a home without a home inspection carried out by a qualified third party.
A publication and form on the FHA official site titled, For Your Protection Get A Home Inspection, states, ” FHA does not guarantee the value or condition of your potential new home.
If you find problems with your new home after closing, we can not give or lend you money for repairs, and we can not buy the home back from you.” That is true even after a home passes the FHA appraisal process.
Home inspections provide a much more complete look at the home, including the roof, foundation, mechanical systems, septic, etc. The inspection process—which the borrower must arrange and pay for on his or her own—goes into far greater detail than an appraisal ever could.
An FHA appraisal may indeed detect certain issues with a home and require corrections, but even in cases like these a home inspection should be paid for and carried out to ensure there are no further problems with the home that need to be addressed.
The home inspection process (as opposed to the appraisal process) is the only way to be a fully informed borrower when purchasing your new home.
Home inspectors in your local area operate independently of the FHA and the lender and you can find them by searching local listings online or in your local publications.
Some states may have licensing or other professional requirements for home inspectors; if you aren’t sure where to locate a reputable inspector, you may wish to ask a local contractor or real estate agent for a referral.
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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