July 28, 2015
A reader got in touch with us to ask about a situation where a home with foundation problems was purchased with an FHA loan. The reader says a home inspector was not hired because the foundation issue was “supposed to be taken care of” prior to the borrower moving in. Later, the borrower discovered that no corrections to the foundation had been made and further problems were discovered.
The main question was whether or not the borrower has any legal recourse in situations like these.
FHA loan rules and the FHA/HUD official site are very specific when it comes to borrowers who rely on FHA appraisals and their outcomes instead of hiring a home inspector to take a more in-depth look at the property. The FHA appraisal is not a stamp of approval from the FHA nor is it a promise that a home is defect-free.
Borrowers should make agreements with the seller of the home that the purchase of the home is contingent on the results of a home inspection, or the borrower should have the home inspected prior to making a firm commitment with the seller.
The FHA cannot help borrowers who have purchased homes solely based on the results of an FHA appraisal–there is no additional loan money that can be made available to repair problems and the FHA cannot “take back” the loan or order the lender to do so in cases like these.
Again, the home inspection may be an optional part of the FHA home loan process, but it’s one of the most important. You cannot make an informed decision about your home loan without the home inspection to give you a true insight to the nature of the property. The appraisal is quite different than an inspection–the home inspector takes a much closer look than the appraiser.
The borrower’s best course of action in this particular case is to consult a lawyer to see what options might be available. State law, building code, and even local ordinances may play a part in determining what is possible.
Do you have questions about FHA home loans? Ask us in the comments section.
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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