Articles Tagged With: FHA Appraisal Rules

September 21, 2015

FHA Loan Appraisal Questions

There are many readers who ask us appraisal-related questions in the comments section here; some are general questions, while others get quite specific. Here’s an example of one of the more specific FHA appraisal questions we’ve been asked recently: “If a bedroom has two windows with keyed burglar bars do both have to be replaced with quick release burglar bars?”. The FHA has recently issued HUD 4000.1, which is a comprehensive policy guidebook for FHA single family loans including references to FHA appraisal standards. Those references do include a mention of bars on windows: “The Appraiser must report when the Property has security bars on bedroom windows or doors.” Note that this reference says nothing about replacement or removal, however state or local building code might. So what all borrowers | more...

September 1, 2015

FHA Appraisal Questions: Peeling Paint And Paint Chipping

By Joe Wallace

FHA appraisals can be tricky to understand, depending on the outcome. For example, we get asked several times a year why an FHA appraiser required corrections on cracked or peeling paint on surfaces in a given home. The question is usually associated with the seeming cosmetic nature of these corrections. “Why,” the readers will ask, “is this a must-fix when it’s just some paint peeling off a windowsill or door frame?” The answer in this particular case has a lot to do with lead abatement. Depending on the age of the home, lead paint may or may not be present. The FHA appraisal process requires mandatory correction of peeling paint in order to reduce potential or actual lead hazards. It’s true that this could, in certain cases, be perceived as | more...

July 28, 2015

FHA Loans, Foundation Trouble, And Home Inspections

By Joe Wallace

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 | more...

July 2, 2015

FHA Appraisals: Vapor Barrier Issues

By Joe Wallace

A recent reader question that arrived in our comments section involves an FHA appraisal that required a vapor barrier on all exposed dirt. The reader complained that the FHA appraiser didn’t explain how to correct the issue and asked us to define how it can be done. One objection to the FHA appraisal in this case was that the reader was under the impression that the FHA had removed the vapor barrier requirement from its list of minimum property requirements. While we aren’t experts on vapor barriers or how they are to be carried out, we can address the issue of being required to carry out a correction or repair that is not specifically required by FHA minimum property standards. It’s very important to know that FHA minimums are not | more...

June 30, 2015

FHA Home Loans and the Appraisal Process

By Joe Wallace

The appraisal portion of the FHA home loan process is often misunderstood. What exactly IS an FHA appraisal and what is it designed to do? The answers are very important, especially for first-time home buyers. The FHA appraisal process is designed to do two basic things–one is to establish the fair market value of the home you want to purchase with an FHA loan. This is accomplished when an FHA appraiser–who is NOT considered a home INSPECTOR–reviews the home to make sure it meets minimum standards for safety and habitability. The review of the home is also designed so that the appraiser can compare the property to others like it on the market. The appraiser does the review, writes an appraisal report, and submits it to the lender. At no | more...

June 8, 2015

FHA Appraisals and Loan Approval

By Joe Wallace

When you are ready to commit to buying a home with an FHA mortgage, one of the big steps toward making that happen is the appraisal process. Borrowers sometimes confuse FHA appraisals with a home inspection, but the appraisal is not a complete, top-to-bottom review of the home. A property may be appraised and approved for the loan, but still contain issues unknown to the borrower. That is why a home inspection is so important. How does the appraisal process work? An assigned FHA approved appraiser comes to the home and personally walks through it, noting any obvious defects in workmanship, code compliance issues, and other things that could require attention as a condition of FHA loan approval. Sometimes there are no issues and the home “passes” the FHA appraisal | more...

What happens to my FHA loan in a natural disaster?

June 2, 2015

The Purpose of the FHA Appraisal For An FHA Home Loan

By Joe Wallace

When you want to buy a home with an FHA mortgage loan, the appraisal process is an important step towards getting the loan approved. The lender is required to determine the loan amount based on the lesser of the appraised value or the sales price of the property. And while borrowers should not confuse the required FHA appraisal with the optional, but still crucial home inspection process, it’s important to know how the FHA defines and views the appraisal in the home loan process. FHA loan rules for appraisals are currently found in HUD 4155.2, Chapter Four. In that chapter, under a heading titled “Purpose of a Property Valuation”, we find the following: The purpose of the property valuation process is to: –determine eligibility for mortgage insurance based on the | more...

When Is An FHA Loan Better Than A Conventional Loan?

May 21, 2015

FHA Loan Appraisals and Home Value: A Reader Question

By Joe Wallace

A reader asks, “We built a new home and within a few months started noticing moisture spots on our basement floor. After no action from the builder for 8 months, we have had to hire an attorney to make them start fixing it. It has been recommended that an interior peripheral drain (or a waterproofing system) be put in.” “The builder defect is our exterior drain was put in incorrectly so drainage water from rain and snow melt is ending up under our slab. I am very concerned about how this will effect resale someday. Have you seen an appraisal adjustment made on a home having this sort of system in place?” The problem with appraisal-related questions like this one is that conditions vary from market to market. What may | more...

May 11, 2015

FHA Loan Appraisals: Sewer/Septic

By Joe Wallace

A reader asks, “We closed on house on 3/31. Had inspection. Stated was sewer, prev owner said was sewer, realtor said was sewer. On 5/8 found waste backed up in toilet in basement, called plumber, found out we have a septic system, currently waiting on them to come out inspect and pump.” “We have a FHA loan. How was this missed? we have no problem paying to have it pumped, but who is responsible if it more then pumping out issue? The company we called (only one in area) stated he had just pumped it 2 years ago. So prev owners knew it was on septic.” There is one important question which must be answered–did the reader assume the FHA appraisal could substitute for a home inspection, or did the | more...

May 2, 2015

FHA Loan Reader Questions: Septic Tanks, Condo Loan Rules

By Joe Wallace

We have two questions today that are linked by a common answer. The first question: “Isabela, PR (00662). what is HUD/FHA requirement regarding septic tank covered with grass. the complete back yard, including septic tank is covered. I am undergoing a HARP refinance…” The answer to this question depends on what the state/local code requirements are for septic tanks. FHA loan rules include a requirement that septic systems meet the approval of the local authority. If you contact the FHA directly by calling their toll-free number, you will learn that the FHA does not–and cannot–maintain archives of all state and local building codes across the United States. A borrower who needs information like this should contact the local authority to learn what the rules might be. The second reader question: | more...