September 26, 2016
We’ve gotten a number of FHA loan questions lately about well water, and properties that are served by wells. It’s true that a home that is served by an individual well or a shared well can be approved for an FHA mortgage loan, but the well must meet FHA requirements. The latest reader question about wells and FHA mortgage loans asks:
“Can a single family residence use a water tank to bring the flow test up? This is highly common in the area.”
What the reader is asking about is covered-in part-by an FHA mortgage loan rule found in HUD 4000.1, on page 162. There are varying standards for wells depending on whether the well serves an individual home or is considered a “shared well” that services multiple properties.
For shared wells, FHA loan rules state that the shared well must be, “capable of providing a continuous supply of water to involved Dwelling Units so that each existing Property simultaneously will be assured of at least three gallons per minute (five gallons per minute for Proposed Construction) over a continuous four-hour period.”
The rules go on to say that for shared wells, “The well itself may have a lesser yield if pressurized storage is provided in an amount that will make 720 gallons of water available to each connected existing dwelling during a continuous four-hour period or 1,200 gallons of water available to each proposed dwelling during a continuous four-hour period. The shared well system yield must be demonstrated by a certified pumping test or other means acceptable to all agreeing parties.”
However, for individual wells, there is no written provision for pressurized storage. However, this section of the rules does not specifically prohibit the practice, so it would seem there is a gray area here.
In cases like these, the borrower would do well to speak to the lender to see what is customary in that housing market in such situations. It may be that lender standards, state law, or even local code or other ordinances may dictate what is possible.
When a borrower pays the appraisal fee and has an FHA fee appraiser review the property, he or she will make recommendations for areas that do not meet FHA loan minimum property standards. It may be that in that housing market, an individual well with a water tank may (or may not) be acceptable. If the appraiser notes that the water tank is not acceptable to bring the well water flow requirements to FHA minimum standards, if corrections are possible they will be recommended. Where corrections are not possible, the home may be declared unfit for an FHA mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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