Articles Tagged With: FHA Appraisals

May 20, 2016

FHA Appraisal Rules: A Reader Question

A reader got in touch with us recently to ask a question about wells and FHA loan approval. “Is a flow test required on a pre-existing drilled well in order to get financing using FHA? This is in a town where there is no public water and a drilled well is the normal. Well has passed all other test to determine all health safety and has been approved by the FHA appraiser.” FHA loan rules state that “Wells must deliver water flow of five gallons per minute over at least a four-hour period”. Furthermore, “The Mortgagee must ensure that new wells are drilled and are no less than 20 feet deep and cased. Casing should be steel or other casing material that is durable, leak-proof, and acceptable to either the | more...

May 17, 2016

FHA/HUD Appraisal Standards Part II

By Joe Wallace

In our previous blog post we discussed FHA loan appraisal standards and answered a reader question about what it means for FHA/HUD standards to include the term “whenever feasible” in relation to certain features such as city utilities (versus wells or cisterns, for example). Further clarification of the FHA and HUD position on minimum property standards is available from the HUD official site (www.HUD.gov), which includes the following background information: “Until the mid-1980’s, HUD maintained separate Minimum Property Standards for different types of structures. Since that time, HUD has accepted the model building codes, including over 250 referenced standards, and local building codes, in lieu of separate and prescriptive HUD standards.” But, the official site adds, there is an important difference when it comes to the FHA/HUD standards versus other | more...

May 17, 2016

FHA Mortgage Appraisal Requirements: A Reader Question

By Joe Wallace

We get many questions about the FHA loan appraisal process in our comments section. Here’s one of the latest: “What does whenever feasible mean? My lender is telling me I need a quote on connecting to the public sewerage system and that this should be more than 4% of the purchase price to be considered not feasible. Where are they getting this information?” This question is in reference to an older blog post we made in 2014 discussing FHA/HUD appraisal standards for septic systems. Here is the specific part of the post the reader is referencing: “In general, the FHA minimum property requirements for sewer systems, as listed in HUD Handbook 4940.3 states: ‘Whenever feasible, connection shall be made to a publicly owned or publicly controlled system that is adequate | more...

May 12, 2016

FHA Appraisals and Roof Issues: A Reader Question

By Joe Wallace

A reader got in touch with us recently to ask about FHA loan rules for a home in need of certain types of repair. “If the home needs a new roof, will FHA allow a clause or let money sit in escrow for roof repairs after closing?” While the question is too general to give a specific yes or no answer to, there is at least one option that may be possible. Much depends on what the FHA appraiser recommends for that property. Does the roof need to be replaced completely? Or are there simple repairs required? Has the appraisal happened yet, or is the borrower aware of a situation with the roof that could interfere with loan approval unless repaired or corrected? An FHA appraiser will recommend corrections in | more...

May 10, 2016

FHA Loan Appraisal Requirements and State/Local Code

By Joe Wallace

Recently we received a question in the comments section about FHA requirements for homes served by wells. The reader want to know if a “shallow well” was permitted. FHA loan rules do address an aspect of this reader question, stating that for existing construction the well must deliver a specified amount of water: “Existing wells must deliver water flow of three to five gallons per minute”. For new construction, FHA loan requirements state, “Wells must deliver water flow of five gallons per minute over at least a four-hour period”. But one thing that is very important to keep in mind is that for well water and many other appraisal issues including electrical systems, septic, plumbing and many other features, FHA requirements are not the only ones that must be observed. | more...

May 5, 2016

FHA Loans and FICO Scores: Fact and Fiction

By Joe Wallace

Some potential FHA borrowers have questions about FHA loan credit score requirements. It’s easy to hear part of story when it comes to other people qualifying for an FHA mortgage and assume you’ve gotten all the facts, but the reality is that FHA loan rules and credit score requirements aren’t the whole picture. Lender standards also have a say in loan approval. That is why FHA loan rules, which specify a FICO score starting at 580 (for maximum financing), don’t have the final say. Lender standards also apply, and those standards (provided they are applied in accordance with federal law) will also factor into the application process. An FHA loan fact: FICO scores below 500 are not permitted. An FHA loan fiction: Anyone with a FICO score in the mid | more...

April 6, 2016

FHA Loan Rules: Documentation Standards

By Joe Wallace

Do you know the FHA loan standards for the age of documents associated with the loan and how those standards may apply to your loan? HUD 4000.1 has a list of requirements as well as certain exceptions to those requirements when it comes to the nature of the documents used to originate and approve the loan including appraisals, credit reports, and more. One of the most important rules in this area has to do with how documents are handled. For example, did you know that credit reports must come directly from the credit reporting agency and cannot be provided via the FHA loan applicant? Another rule in this area is that certain documentation may be acceptable in an electronic format, but such documentation is subject to state law and lender | more...

April 5, 2016

Understanding FHA Appraisals

By Joe Wallace

Whether you’re purchasing a suburban home, a town home, manufactured home or condo, all properties must be appraised before the loan can be approved. The appraisal process and its requirements may vary depending on whether the home is under construction, is considered new construction, or is termed “existing construction”, but in all cases the property must meet minimum FHA standards also know as MPRs and MPS. HUD 4000.1 explains the appraisal process: “The Appraiser must observe, analyze and report that the Property meets HUDs MPR and MPS. Minimum Property Requirements (MPR) refer to general requirements that all homes insured by FHA be safe, sound, and secure. Minimum Property Standards (MPS) refer to regulatory requirements relating to the safety, soundness and security of New Construction.” “Every Property must be safe, sound, | more...

March 4, 2016

Ordering a Second FHA Appraisal: The Rules in HUD 4000.1

By Joe Wallace

There are many questions about the FHA appraisal process–we get many in the comments section asking about the nuances of FHA appraisals. One typical question has to do with when a second appraisal is appropriate or permitted. Can a second FHA appraisal be ordered if the borrower or lender doesn’t agree with the outcome of the original? HUD 4000.1 spells out the rules for FHA appraisals including “second appraisal” requirements. They include the following: “The Mortgagee is prohibited from ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required. The Mortgagee may order a second appraisal for Mortgages that are in accordance with requirements on Property Flipping.” FHA policy, based on the reading above, is clear–you can’t | more...

December 30, 2015

FHA Appraisal Fees, Appraiser Integrity Rules In HUD 4000.1

By Joe Wallace

The FHA appraisal process is very important–it helps establish the fair market value of the home and insures that the home meets minimum standards. Just because a home passes the FHA appraisal process does not mean it is defect-free. It’s the borrower’s responsibility is to hire an independent home inspector for verification of the home’s condition in a more complete way than the appraisal. FHA loan rules published in HUD 4000.1 establish some guidelines and ground rules for appraisals, lenders, and others who might be in the home loan “food chain”. Did you know that the FHA does NOT set appraisal fees? That’s just one important aspect of the rules for this process found in HUD 4000.1. “The Appraiser and the Mortgagee or Mortgagee-designated third party will negotiate the appraisal | more...