Articles Tagged With: FHA Appraisal Rules

August 10, 2017

FHA 203(k) Fixer-Upper Loans: What About The Appraisal?

When you buy a home with an FHA mortgage, it must be appraised to insure the property meets minimum FHA standards. A home to be purchased with an FHA mortgage must be code-compliant, it must not be too close to high voltage lines or high pressure gas pipelines, and there are specific requirements for property located near know natural disaster zones. All of these requirements protect buyers and lenders alike, but there are certain instances where a property would never pass the FHA appraisal, yet borrowers seek mortgage loans for these properties anyway. Consider the borrower who needs a home loan to do rehab or repair work on an existing structure that badly needs it. And what about the borrower who wants to purchase a fixer-upper home, or a property | more...

August 10, 2017

What Is An FHA Appraisal?

By Joe Wallace

What is an FHA appraisal? It’s one of the most important parts of your home loan process when purchasing property with an FHA mortgage. The appraisal is a mandatory review of the property to help the lender establish the fair market value of the home while making sure the property meets minimum FHA requirements. But there’s more to the appraisal, as we’ll learn. The FHA Appraisal Is A Tool For Your Loan Officer Appraisals are not intended to help or inform the buyer as to the condition of the property. Some mistake the FHA appraisal for a home inspection, assuming that the FHA will “approve” or “reject” a home based on its’ condition. The appraisal process is NOT a home inspection. Borrowers who choose not to pay for a home | more...

August 3, 2017

How Do FHA Loan Appraisals Work? Part Two

By Joe Wallace

FHA loan appraisals are a big part of the FHA loan approval process. Without the appraisal, your home loan application cannot move forward. The FHA appraiser compares the home you want to buy with an FHA loan to similar properties on the market and reviews the condition of the home to make sure it meets FHA minimum standards. Once the value of the home has been established, your lender can determine what your FHA loan amount should be, factoring in the amount your required down payment, plus the amount of any extras you choose to have financed into the loan (such as the Up Front Mortgage Insurance Premium). The FHA appraiser will visit the property-there is a requirement that the appraiser be physically present-to look at the home inside and | more...

Credit Scores For An FHA Home Loan: When Low Credit Is Not Bad Credit

August 3, 2017

How Do FHA Loan Appraisals Work?

By Bruce Reichstein

How do FHA loan appraisals work? This question is a vital one because some get the appraisal process confused with a home inspection and the two are not the same. The importance of an FHA appraisal in your loan process has to do with the lender getting information that helps calculate the fair market value of the home, while the home inspection gives the borrower information needed to make an informed purchase. FHA appraisals are governed by the rules in the FHA loan handbook, HUD 4000.1, which says the lender is required to, “order an appraisal from an Appraiser who is listed on the FHA Appraiser Roster and is qualified and knowledgeable in the specific market area in which the Property is located. The Mortgagee must evaluate the Appraiser’s education, | more...

June 29, 2017

What Is An FHA Loan Appraisal?

By Bruce Reichstein

What is an FHA appraisal? Simply put, it’s a tool used by the lender to make sure the property to be purchased with an FHA mortgage meets minimum standards. It’s also used by the lender to establish the fair market value of the property for the purpose of setting the proper FHA loan amount. FHA appraisals require a trained, impartial professional who is approved by the FHA. The lender and the appraiser do not “work together” in such a way that puts the appraiser in a compromising position by the lender. Instead, the appraiser is selected, she does her work and submits reports that detail the results of the appraisal. How do FHA loan appraisals work? The appraiser must visually inspect the property, noting any defective conditions, building code issues | more...

June 29, 2017

What Is An FHA Loan Inspection?

By Joe Wallace

What is an FHA loan inspection? That is a tricky question to answer because the very phrase “FHA home inspection” implies something that is not true; that the FHA puts a stamp of approval on homes promising the borrower that they are defect-free once “inspected”. There is no such thing as an FHA home inspection. There IS, however, an FHA home APPRAISAL. But borrowers tend to mistakenly assume that the appraisal process is the same thing as a home inspection. These two things could not be further apart. Home Inspections Are Optional, But Very Necessary A home inspection (not an FHA appraisal) is an optional process the borrower is responsible for arranging and paying for and is not associated with the FHA appraisal in any way. The inspection should be | more...

May 18, 2017

FHA Appraisal Problems: A Reader Question

By Bruce Reichstein

We’ve gotten a variety of questions in our comments section this week about issues connected to the FHA appraisal process. Here’s the latest: “I have an FHA loan. It started raining on the day of the appraisal and we noticed a leak in the basement. The sellers agreed to fix the drainage issue that was causing it. During the walk-through we noticed that instead of busting out concrete and installing drainage pipes that they patched it up with more concrete. As ugly as it was I was okay with it as long as it kept the basement dry.” “Fast Forward to the first rainy day after closing on the home and I have an all out flood in my basement! My realtor said that there is nothing that can be | more...

May 17, 2017

FHA Appraisal Questions: Defective Conditions

By Joe Wallace

A reader asks a question about FHA appraisal issues: “Bought a house that was supposedly totally renovated about a 1.5 months ago. Finding out about major issues and violations in the house. There were a lot of concealed things hidden…found they had unlicensed contractors.” “Didn’t have the money to do a regular home inspection. People were saying FHA does their own home inspection to make sure house is safe…problems with windows plumbing illegal hookup with water main electrical box etc. Have to make a payment to mortgage plus fighting with seller to get licensed contractors…please tell me why didn’t FHA see these issues.” FHA appraisals must never be confused with a home inspection. The FHA and HUD warn borrowers of this in a document found on the FHA/HUD official site | more...

FHA Loans And Natural Disasters: What You Should Know

March 31, 2017

FHA Appraisal Rules: When Corrections Are Required

By Joe Wallace

The FHA appraisal process is a typical part of purchasing a home. The appraisal establishes the fair market value of the property and also insures the home meets minimum FHA loan standards. These standards are know as MPS and MPRs-Minimum Property Standards and Minimum Property Requirements, respectively. While the FHA appraisal is not designed to catch any/all problems with a home, it is a tool for the lender to use to determine whether the property is acceptable or not. Whether you’re applying for a fixed rate mortgage or adjustable rate loan, purchasing a condo, town home, or manufactured home, each transaction is subject to the FHA appraisal process. What happens if the appraiser reviews the property only to find issues that do not meet FHA minimum standards? The answer is | more...

December 12, 2016

Appraisal Issues: Wood Floors

By Joe Wallace

FHA appraisal topics have been very popular recently in our comments section. One reader asks, “I’m going to view a home that has a plywood floor in the basement. not sure if that will be acceptable by FHA guidelines. Is there somewhere I can access a list of what is unacceptable?” FHA appraisal requirements for forward and “reverse” mortgages (HECM loans) are found in HUD 4000.1, starting on Page 465. This handbook can be downloaded from the FHA official site at www.fha.gov. A quick scan of HUD 4000.1 doesn’t reveal a specific requirement for the nature or construction of wood flooring in basement areas, but that leads us to a very important point where issues like these are concerned. FHA appraisal rules are NOT the only guidelines that must be | more...