January 20, 2011
House hunting has some unique challenges depending on the type of property a buyer wants. When an FHA loan applicant finds a home that isn’t quite standard but still desirable, the buyer and seller alike may be a bit nervous when it’s time to have the property looked over by an FHA assigned appraiser.
Sometimes establishing fair market value isn’t the reason for those nervous feelings; the buyer and/or seller might be worried the property won’t get appraised at all because of those features.
Low ceilings are one such type of non-standard or unusual features. A home with a very small amount of square footage is another. How does an FHA appraiser decide whether or not such features meet minimum property requirements for an FHA loan and what is the criteria for judging?
Fortunately for some house hunters, the non-standard nature of a given property is not the basis for denial of an FHA mortgage loan. According to the FHA requirements for appraisals, unique or unusual features must be judged according to safety standards rather than their aesthetic appeal.
According to the HUD/FHA Homeowner Center Reference Guide, “The eligibility of these properties depends on whether or not the property is structurally sound and readily marketable. If a property meets these criteria, the appraiser establishes market value.”
That’s good news for buyers and sellers alike, but the FHA does include a caveat. It’s not against FHA rules for the lender to also make a determination based on the nature of a property. A home that passes FHA minimum property requirements (MPRs) and is assigned a fair market value may still be re-evaluated by the lender. According to the FHA, “depending on the uniqueness of a property, the final determination to accept or reject the house is made by the lending institution’s underwriter.”
From the FHA standpoint, any property that is safe and meets FHA MPRs is approved for an FHA guaranteed loan to a qualified borrower once it has been assigned fair market value by the appraiser…but the lender may have the final say on unique properties.
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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