Articles Tagged With: FHA Appraisals

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 8, 2015

FHA Mortgage Loans and Home Inspections

By Joe Wallace

When you buy a home with an FHA mortgage, there is a process known as a appraisal that must happen prior to loan approval. An FHA appraisal involves a professional who reviews the property to insure it meets FHA minimum standards for safety, economic viability, and livability. Some mistake the FHA appraisal process for a home inspection, but the FHA and HUD are quick to point out that the appraisal is NOT a complete, top-to-bottom review of the home. We get comments and questions about this process in our comments section, and many of them have a familiar theme. Consider this recent reader comment: “…it boggles my mind how I could have bought my home 5 short months ago with an FHA loan and found out that it was infested | 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 17, 2015

FHA Loan Minimum Property Standards In HUD 4000.1

By Joe Wallace

The FHA home loan rules published in HUD 4000.1 include a set of minimum property standards that a home purchased with an FHA mortgage must live up to. The FHA appraisal is the process used to determine whether a property meets these minimum standards, also known as MPRs (Minimum Property Requirements) and MPS (Minimum Property Standards). According the 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 Minimum Property Standards (MPS). Minimum Property Requirements refer to general requirements that all homes insured by FHA be safe, sound, and secure.” HUD 4000.1 defines MPS as, “regulatory requirements relating to the safety, soundness and security of New Construction. When examination 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 2, 2015

FHA Mortgage Loans: Home Inspections And Appraisals

By Joe Wallace

We get many reader questions about the FHA appraisal process that include the phrase “FHA inspection”. But there is no such thing as an FHA “inspection”, there is only an appraisal designed to make sure the property to be purchased with an FHA loan meets minimum standards and establish the fair market value of that property. It’s a mistake to assume that a home that “passes” an FHA appraisal is free from problems or defects. The FHA appraisal is never intended to be a stamp of approval on the home or a guarantee of any kind. That is why the FHA and HUD urge borrowers to pay for the optional but extremely important home inspection as well as the appraisal. The home inspection is something the borrower must schedule and | 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...

October 1, 2015

HUD 4000.1 Appraisal Requirements: Safety Hazards

By Joe Wallace

With the publication of HUD 4000.1, the new FHA Single Family Home Loan policy handbook, we’ve been addressing certain rules and regulations found in the new rules to help borrowers and lenders alike understand official policy, updates, changes, and restatements of previous regulations as published by the FHA/HUD. FHA appraisals are also affected by the new handbook. One area that contains crucial information about the appraisal process is the section of FHA appraisal rules that govern safety/environmental hazards as might be found during the appraiser’s review of a property to be purchased with an FHA mortgage. In some cases, you may notice some additional features to this section, and revised language that gives more clarity or guidance for appraisers and lenders. From HUD 4000.1 Section II Part B: “The Appraiser | more...