Articles Tagged With: FHA Appraisals

May 17, 2017

FHA Loan Appraisal Questions: Well Water Guidelines

A reader asked us an FHA loan appraisal question this week about a recent post we did on water quality issues. “We have been requiring a safe water test to verify the water standards are meet per the guidelines but we now have an Loan Officer arguing that it is not required unless the appraiser notes an issue. Is a water test really not required have I been reading the guidelines wrong since 2015?” The “we” in this case would seem to be a participating FHA lender. Is the loan officer mentioned in the question correct? We turned to the relevant passages in HUD 4000.1 to reaffirm what the FHA loan rule book says about water quality. “The Mortgagee must confirm that a connection is made to a public or | 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...

May 16, 2017

FHA Appraisal Questions: Peeling Paint, Electrical Outlets

By Joe Wallace

We frequently get FHA appraisal questions in our comments sections. Here’s one of the latest: “Im trying to purchase a home and I have an FHA loan. The only thing Im concerned about is the peeling paint outside and that some of the outlets arent grounded. How would this affect my FHA loan approval?” FHA appraisal rules are found in HUD 4000.1. The instructions to the FHA appraiser don’t cover all possible contingencies for defective conditions, required corrections, etc. but do have something to say about peeling paint. The age of the paint may determine the extent of the corrections/repairs in this area. According to HUD 4000.1, for homes or improvements on or before 1978: “The Appraiser must note the condition and location of all defective paint and require repair | more...

May 11, 2017

FHA Loan Appraisal Questions: Dug Wells

By Joe Wallace

Are properties with dug wells a problem when it comes to FHA loan approval? That’s what one reader asked us this week in the comments section: “Would like to know if a dug well is OK for an FHA loan.” Short, simple, and to the point. The answer is, unfortunately, not so straightforward. The reader was asking a question in response to a blog post we made back in 2010 which referenced then-applicable FHA loan rules for wells-including dug wells. However, the references in that old blog post have since been replaced with updated guidance and instructions to the FHA appraiser. HUD 4000.1 (the FHA loan rule book) is the most current reference, and contains this section that references dug wells: “The Appraiser must report when water to a Property | more...

When Is An FHA Loan Better Than A Conventional Loan?

April 14, 2017

Identity of Interest Issues And FHA Loans

By Joe Wallace

A reader got in touch to ask about FHA loans and identity of interest rules this week. “I have a loan that I am working on right now and the underwriter is saying that we have an “identity of interest” issue.” “The situation is this my borrower is not related to the seller but has been renting the house she is buying for five months. Because there is no family relationship between the seller & buyer, does she has to live in the house for six months?” The FHA loan rule book, HUD 4000.1, describes identity of interest transactions as a house sale “between parties with an existing Business Relationship or between Family Members.” The word “interest” in this case refers not to interest rates, but rather to the interest | 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...

March 13, 2017

FHA Loans and Septic Distances

By Joe Wallace

What are the FHA loan guidelines for septic tank issues? A reader asked us a question in this area in the comments section recently: “I am in contract to buy a home with a FHA 203 rehab loan. Today I had building and septic inspections and I found the septic was actually located on the neighbors property. The neighbor doesnt care and is very willing to work with me on it. Does this disqualify the loan?” There are several factors at work for FHA loan approval, not just FHA loan minimum standards. State law, building code, health department requirements and other regulations may affect whether corrections are required as a condition of loan approval. So it’s very important to understand that FHA loan rules may be silent in areas where | more...

February 21, 2017

FHA Appraisal Timing: A Reader Question

By Joe Wallace

A reader asks us a question about FHA appraisal rules this week in our comments section. “Buyers want my house but dont want to process the sale until the end of April. It is now Feb. 19th 2017. I dont have a problem with that but do want some kind of guarantee that they are going to buy it.” “They are going FHA. Should I ask them to have and pay for an appraisal & inspection now as a good faith issue? If I do hold the house for 2 months I am the only one to suffer if they dont buy. Also who does the appraisal and inspection if the loan is FHA?” As for the timing of the appraisal and home inspection, that would be up to the | more...

February 13, 2017

FHA Appraisal Basics You Should Know

By Joe Wallace

The FHA appraisal process can be mysterious to some. It’s not as complete as a home inspection, the results of the appraisal should not be mistaken for a home inspection, nor should the FHA appraisal be considered as a stamp of approval on a home. So what IS an appraisal? And what do FHA appraisal rules require from this process? There’s an old notion borrowers should know about when it comes to inspections versus appraisals. The appraisal is basically a tool for the lender, the inspection is for the borrower. As long as you keep that in mind when ordering your home inspection, you’ll be able to keep these two separate processes in the right perspective. HUD 4000.1 has rules and instructions for how an FHA appraisal is to be | more...

January 30, 2017

FHA Appraisals and Inspections: A Reader Question

By Joe Wallace

FHA appraisals are NOT the same as home inspections. This week we received a question about the appraisal process that serves as a reminder of this. A reader asks: “I purchased a home that was funded by FHA but the foundation is in significant disrepair it. There are whole sections where the beams are not being supported by anything therefore the beams will eventually not be able to sustain the floor. Approximately 30 Jacks or posts need to be added, addition to a few beams, most significantly in one 8 X 31-foot section of the house where there is nothing supporting it other than the outside foundation wall on one side.” “Basically it needs $35.000+ of work. The FHA guideline says that a structure has to be in good repair | more...