Articles Tagged With: FHA Appraisal Rules

December 29, 2015

FHA Appraisals And The Cost Of Appraiser-Directed Repairs

When it’s time for the FHA appraisal to happen, a borrower may be understandably nervous about the outcome of the appraisal. What happens if the appraiser finds areas that must be corrected or repaired? In many cases those corrections or repairs are directed as a condition of loan approval. In some instances (which would be handled on a case-by-case basis) the repairs may also require a compliance inspection which the borrower would have to pay for. When repairs or corrections are required, can the borrower request that the cost of making those repairs be added to the home loan? According to HUD 4000.1, “A Mortgagee may add repair costs to the sales price before calculating the mortgage amount if: –the repairs are required by the Appraiser to meet HUDs Minimum | more...

December 24, 2015

FHA Appraisal Standards: “Ordinary” Home Purchases Versus Fixer-Uppers

By Joe Wallace

One good question that comes our way in the comments section from time to time involves the difference between an ordinary new home purchase loan or FHA mortgage and the purchase of a fixer-upper with an FHA rehab loan. If appraisal standards for FHA loans include minimum property requirements, how can a fixer-upper be purchased with an FHA mortgage? After all, the nature of a fixer-upper loan is that you take a property that is in need of rehab or repairs and bring it up to standards. How can a fixer upper pass an FHA appraisal? Fortunately, this issue is addressed in HUD 4000.1, which includes the following: “As the on-site representative for the Mortgagee, the Appraiser provides preliminary verification that a Property meets the Property Acceptability Criteria, which includes | more...

December 14, 2015

HUD 4000.1 On Appraisal Expiration Dates

By Joe Wallace

Ever since the FHA and HUD published the new FHA single-family mortgage loan rule book, HUD 4000.1, we’ve been examining important sections of the rules to see what current FHA mortgage loan policy is; FHA and HUD announced there would be no comparison document outlining the myriad of changes from the old guidelines to new and that it was the reader’s responsibility to learn what current policy might be for any given FHA loan topic. With that in mind we started reviewing HUD 4000.1 and discussing important issues. One such issue is the FHA’s rules on appraisal expiration dates. FHA appraisals are generally valid for 120 days, but the rules in HUD 4000.1 add: “The 120 Day validity period for an appraisal (see Ordering Appraisals) may be extended for 30 | more...

November 24, 2015

HUD 4000.1 On Appraisals: Sewage Systems

By Joe Wallace

In a recent blog post, we examined what FHA loan rules in HUD 4000.1 say about water utility systems. Borrowers and sellers alike should know the FHA stance on public utilities–especially where it comes to water hookup: “The Mortgagee must confirm that a connection is made to a public or Community Water System whenever feasible and available at a reasonable cost. If connection costs to the public or community system are not reasonable, the existing onsite systems are acceptable, provided they are functioning properly and meet the requirements of the local health department.” That’s part of the entry in HUD 4000.1 about water utility systems, but there is also a separate entry for sewage. This entry begins by basically restating the above for clarity: “The Mortgagee must confirm that a | more...

November 20, 2015

FHA Minimum Property Requirements in HUD 4000.1: Remaining Economic Life Of The Home

By Joe Wallace

HUD 4000.1 has a section with guidelines concerning the minimum property standards for homes to be purchased with an FHA mortgage. There are instructions to the lender concerning issues such as encroachments, overhead power lines, safety and related issues. HUD 4000.1 has specific language that requires certain aspects of the home be functional for the life of the loan. “The Mortgagee must confirm that the Structure of the Property will be serviceable for the life of the Mortgage. The Mortgagee must confirm that all foundations will be serviceable for the life of the Mortgage and adequate to withstand all normal loads imposed.” There is also a section that addresses FHA minimum standards for the remaining economic life of the property. These requirements exist to protect the investment made in the | more...

November 19, 2015

FHA Loan Appraisal Standards: Environmental Concerns

By Joe Wallace

We’ve been reviewing appraisal standards and minimum property requirements as listed in the new HUD single family FHA loan rulebook, HUD 4000.1. One important section concerns environmental standards for any home purchased with an FHA mortgage. In general the lender is responsible for insuring that homes purchased with FHA loans are, “free of all known environmental and safety hazards and adverse conditions that may affect the health and safety of the occupants, the Propertys ability to serve as collateral, and the structural soundness of the improvements.” The lender cannot approve homes for FHA mortgages, for example, when power lines cross over certain water-based features of the home such as swimming pools. The existence of high pressure gas pipelines may also be a problem depending on the nature and location of | more...

November 13, 2015

HUD 4000.1 Appraisal Rules: Required Repairs

By Joe Wallace

FHA loan appraisal rules found in HUD 4000.1 give the lender specific instructions on how to proceed with an FHA loan during the appraisal process. HUD 4000.1 has some very specific language that can help a borrower understand key issues surrounding FHA mortgage loans, including why an FHA appraisal should not be mistaken for a “home inspection” nor used in place of one. The FHA appraisal is carried out to make sure the home meets minimum standards, and where a home does not, require minimum repairs or corrections to the property to bring it up to minimum standards. According to HUD 4000.1: “As the on-site representative for the Mortgagee, the Appraiser provides preliminary verification that a Property meets the Property Acceptability Criteria, which includes HUDs Minimum Property Requirements (MPR) and | more...

November 12, 2015

The FHA Appraisal Process: Selecting The Appraiser and Appraisal Integrity

By Joe Wallace

HUD 4000.1, the new FHA single family home loan rulebook, has specific instructions to participating FHA lenders about the appraisal process. An appraisal is required as we learn from this line in Part II Section A of the rulebook: “The Mortgagee must order a new appraisal for each Mortgage or refinance case number assignment and may not reuse an appraisal that was performed under another case number, even if the prior appraisal is not yet more than 120 Days old.” The mortgagee, or participating lender, is required to insure the integrity of the appraisal process as follows: “Appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Rule, when conducting appraisals of Properties intended as security for FHA-insured financing.” “In appraising any Property for the | more...

October 7, 2015

FHA Loan Appraisal Rules: “Second Appraisal” Requests

By Joe Wallace

We get lots of questions about the FHA appraisal process in the comments section. Here is one of the most recent, which raises an important question about “replacement appraisals” or any request for a new appraisal that has to do with a dispute over valuation of the property. The reader asks, “I have a buyer who is buying a home. The home they are buying already had an appraisal completed. That deal fell through and my buyers offer was accepted. The sellers agent said that the original appraisal came in short and asked that we order a new one.” “He said his seller insists on a new appraisal because the original one done a few week before was less that the purchase price. Is is possible to request a new | more...

October 6, 2015

FHA Loan Appraisal Rules: The Roof

By Joe Wallace

A recent reader question about the FHA appraisal requirements had us looking up details on those requirements in the new FHA Single Family loan handbook, HUD 4000.1. The previous FHA loan rulebooks including HUD 4155.1 and HUD 4155.2 have been superseded by HUD 4000.1, so it seemed like a good idea to post the FHA’s current appraisal requirements for the roof since it’s one of the most commonly asked-about parts of the home with respect to the FHA appraisal process. When the FHA appraiser comes to review the property, the roof is one of the areas that must be evaluated. According to HUD 4000.1 Part II Section B: “The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the roof covering does not prevent entrance of | more...