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Do Fha Loans Require Inspections

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Do Fha Loans Require Pest Inspections

NEW 2022 FHA Loan Requirements (NEW And Complete Guide)

FHA loans do not require pest inspections in most cases. In the event the FHA appraiser sees signs of termite damage or if the area is located in a known termite-heavy region, the lender might be required to send a termite inspector to the property.

As a buyer, you can also request a full pest or wood-destroying insect inspection from a local pest control company. These ensure the home youre buying is free of any potential infestations that could pose health hazards .

How Long Does It Take After An Appraisal To Close On An Fha Loan

The time it takes to close on a house varies. Refinances tend to close faster than purchases because sometimes you dont need an appraisal and theres not the same level of title work. Depending on the type of loan youre applying for, there can be more or less documentation involved.

Most lenders will give you the option to lock your rate for as long as 60 days in order to complete the process for a fee. Its important to note that things will be cheaper the faster you can close in many cases. If your lender asks for paperwork, be as prompt as you can be in order to expedite the process.

What Are The Fha’s Minimum Property Standards

According to the U.S. Department of Housing and Urban Development , the FHA requires that the properties financed with its loan products meet the following minimum standards:

  • Safety: The home should protect the health and safety of the occupants.
  • Security: The home should protect the security of the property.
  • Soundness: The property should not have physical deficiencies or conditions affecting its structural integrity.

HUD requires that an appraiser observe the property’s condition and report the results on the FHA’s appraisal form. Property appraisals are one of the many requirements that buyers fulfill before settling a deal.

For single-family detached homes, the appraiser is required to use a form called the Uniform Residential Appraisal Report. The form asks the appraiser to describe the basic features of the property, such as the number of stories, the year it was built, square footage, number of rooms, and location. It also requires the appraiser to describe the condition of the property, including needed repairs, any deterioration, renovations, etc. In addition, the appraiser is required to assess any adverse conditions that affect the livability, soundness, or structural integrity of the property.

The condominium unit appraisal form is similar but has condominium-specific questions about the common areas, homeowner association, the number of owner-occupied units, etc.

  • Missing handrails
  • Crawl spaces with debris and trash
  • Lack of an all-weather driveway surface

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How Long Does An Fha Appraisal Take

Usually, the appraisal will occur within a few days to a week after the seller accepts the buyers offer and the mortgage lender is notified. Of course, this timeline could depend on the lenders process and the FHA appraisers schedule. Due to the rigorous nature of the assessment, an FHA appraisal typically takes several hours to complete, depending on the size of the property and the availability of comparable homes.

What Are The Fha Loan Guidelines For Home Inspections

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FHA loans are a popular option for financing a home purchase because of their relaxed credit requirements and low-down payments. However, its important to know that if youre planning on buying a home with an FHA loan, the property you choose will need to meet certain standards. Heres everything you need to know about FHA loan guidelines for home inspections.

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What Fha Appraisers Look At

When buying a home using an FHA loan, you will be required to get an FHA appraisal. First, the home appraisal is ordered by the mortgage lender. Next, the appraiser will perform a basic inspection on the property to ensure it meets the HUD property standards for FHA loans. For real estate to be classified as FHA approved, it must pass the HUDs FHA property guidelines.

The FHA Appraisal Process

  • Inspect the propertys interior and exterior structure and quality
  • Ensure lead-based paint is not present
  • Check for cracks, leaks, and damage to the exterior
  • Walls and ceilings in good condition without cracks or holes
  • Check the quality of fixtures, plumbing, and appliances
  • Make a note of any upgrades that may increase the value
  • Ensure the Landscape is in good condition
  • Check central heating and cooling systems
  • Take photos of the front, sides, and back of the home. Along with photos of any upgrades that increase the value of the home
  • Include a copy of the location map showing the comparable sales

Sellers: Dont Be Intimidated By Fha Loan Property Requirements

An expert on single-family home sales, South Carolina real estate agent Topher Kauffman hopes sellers wont be discouraged by FHA property guidelines. Hes noticed that recent market changes have made FHA loans more accessible:

There are a lot less restrictions on the FHA and VA loans and appraisals because lenders understand theyre all competing for the home.

In Kauffmans experience, appraisers mostly look for glaring red flags like problems with the roof or air conditioning that make a home unsafe or unlivable.

He also reminds sellers that most conventional loans require appraisals and home inspections, too. So if your home has a significant safety or structural issue, youll likely need to repair or compensate for the issue before you close your sale, regardless of how your buyer plans to pay for the property.

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But The Home Will Have To Be Appraised

While FHA does not specifically require a home inspection, the mandatory appraisal does include a basic assessment of the property.

An FHA-approved appraiser is primarily focused on determining the market value of the house. But he will also review the home to make sure that it meets HUDs minimum property requirements. So there is sort of a mini inspection included within the FHA appraisal process. And this is another common source of confusion among both buyers and sellers.

Lets recap some key points:

  • A full home inspection is generally not required for FHA-insured mortgage loans. If you do get one, it will take place shortly after the offer has been accepted.
  • But the Department of Housing and Urban Development strongly encourages buyers to have a full property inspection, and they issue a written disclosure to this effect.
  • FHA loans do require a property appraisal in order to determine the market value of the house, and to ensure that the property is marketable .
  • An FHA appraisers primary objective is to determine market value, but he will also evaluate the condition of the home to ensure the health and safety of the occupant.

This article answers the question: Is a home inspection required for FHA loans? The information provided above has been adapted from HUD Handbook 4000.1 , as well as other HUD disclosures and documents. We have provided our own comments to clarify official guidelines.

What Happens If Your Fha Appraisal Comes In Low

NEW FHA Loan Requirements – First Time Home Buyer – FHA Loan 2022

If your home is appraised for lower than the sales price, then FHA will not insure it. You have three options:

  • The seller can reduce the asking price to reflect the market value.
  • You can make up the difference with your own funds or another form of financing. In this case, youll be paying more for the home than it is worth.
  • You can walk away. If the seller refuses to reduce the price of the home, and you cannot or dont want to come up with the difference, you can choose to walk away from the deal.

Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Benefits Of An Fha Loan

  • Easier to Qualify FHA provides mortgage programs with lower requirements. This makes it easier for most borrowers to qualify, even those with questionable credit history and low credit scores.
  • Competitive Interest Rates FHA loans offer low interest rates to help homeowners afford their monthly housing payments. This is a great benefit when compared to the negative features of subprime mortgages.
  • Bankruptcy / Foreclosure Having a bankruptcy or foreclosure in the past few years doesn’t mean you can’t qualify for an FHA loan. Re-establishing good credit and a solid payment history can help satisfy FHA requirements.
  • Determining Credit History There are many ways a lender can assess your credit history, and it includes more than just looking at your credit card activity. Any type of payment such as utility bills, rents, student loans, etc. should all reflect a general pattern of reliability.

After learning about some features of an FHA mortgage, undecided borrowers often choose FHA loans over conventional loans because of lower down payment requirements, better interest rate offerings, and unique refinance opportunities.

What Sellers Can Expect From The Fha Appraisal Process

A typical FHA appraisal inspection takes about 30 minutes to complete. It generally takes a few days to complete the report, which is then submitted to the lender for review, Keane shares.

The lender reviews the report and gives a copy to the borrower for their review. If there are any repairs required, the Realtors® are notified, and the repairs will need to be inspected prior to closing. The most common issues Keane encounters are peeling paint and missing safety handrails.

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Fha Construction Loan Lenders

Be forewarned: Its not easy to find FHA construction-to-permanent loans or lenders offering these loans.

Finding a lender that will process these loans quickly, efficiently, and is staffed with a full team is even rarer, says Mushlin.

Fortunately, you can visit the US Department of Housing and Urban Developments website to search for FHA lenders, although not all FHA lenders offer FHA construction loans.

The bottom line: If you want an FHA construction loan, you need to be patient and willing to shop around for the right mortgage company.

This can make the process more complicated than a traditional construction loan but for those who put in the work, there are real benefits to be had.

Reasonably Safe Site Conditions

Kentucky FHA Mortgage Qualifying Guidelines for 2020

The appraiser looks at externalities, or off-property issues that affect the homes value and marketability. Some environmental issues could make a property less safe.

Externalities include:

  • Stationary storage tanks

Natural disasters also play a role in FHA approval. If your property is in an area prone to floods, wildfires, or mudslides, the lender may require disaster insurance or reject the loan altogether. According to the HUD Single-Family Housing Policy Handbook, The Appraiser must report the presence of Externalities so that the Mortgagee can determine eligibility.

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What Type Of Inspections Are Required For An Fha Loan

Many home buyers and homeowners mistakenly believe that the FHA will inspect the home prior to settlement. The Department of Housing and Urban Development, which oversees the FHA loan program, does not mandate home inspections for applicants. However, they do encourage home buyers to obtain a home inspection.

The Federal Housing Administration requires an appraisal on the subject property. The main objective of the FHA home appraisal is to evaluate the home’s current market value. The appraiser will do this by analyzing recent and similar sales in the neighborhood. The majority of mortgage loans need an appraisal, and the FHA lending program is no exception.

The appraiser is not a home inspector, however, appraisers are trained to recognize problems that can affect the health and safety of the home buyer. If the appraiser observes a specific problem, the appraiser will request an inspection by an expert.

The FHA does not require a radon test, well and septic test, or even a pest inspection. However, the lender is allowed by the FHA to supersede the FHA minimum guidelines. The most common exception is a pest inspection. Some

Difference Between Appraisals And Inspections

Before we go any further, I want to cover the difference between a home appraisal and an inspection. This is a source of confusion for a lot of homebuyers, so its important to keep the terminology straight.

Heres the key difference:

  • The primary purpose of a home inspection is to determine the overall condition of the property. It is designed to give the buyer more insight into the property condition, so they can make a more informed buying decision. Inspections are generally not required for getting a mortgage loan.
  • The primary purpose of the home appraisal is to determine the market value of the house. The appraiser will accomplish this by looking at recent and comparable sales in the area, among other things. Most mortgage loans do require of property appraisal, and that includes the FHA loan program.

So while the Federal Housing Administration does not require home inspections for FHA loans, they do require a property appraisal.

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What Do Conventional Loan Inspectors Look For

When paying for a conventional loan, buyers will get slightly different services than with an FHA inspection. The conventional process checks a house to ensure its move-in ready. The inspector will take a look at significant components, like:

The hope is that theyll catch any major issues that require immediate attention. Its a noninvasive examination that will identify the most significant concerns, but not every tiny defect.

Major problems can then become a bargaining tool so the buyer can save money they might put towards the repairs after moving in.

What The Mortgage Lender Must Do

FHA Loan Requirements (Complete Guide For First-Time Buyers)

The HUD handbook also outlines termite-related requirements for the mortgage lender. But again, these are only in cases where the home appraiser has found evidence of an infestation and flagged it in the appraisal report.

Where it talks about underwriting the property, the handbook states:

For existing Properties, the Mortgagee must confirm that the Property is free of wood destroying insects and organisms . If the appraisal is made subject to inspection by a qualified pest control specialist, the Mortgagee must obtain such inspection and evidence of any required treatment to confirm the Property is free of wood destroying insects and organisms.

In other words:

If the home appraiser flags the property for having signs of a termite inspection , the property must then be inspected by a professional pest control company. The pest control specialist would then treat the home, if necessary, to remove the wood-destroying insects. The mortgage lender must then ensure that the property is free of such pests.

Those are the basic termite inspection requirements for FHA loans.

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Home Inspection Is Not Required For An Fha Loan Approval

While the FHA recommends buyers to get a comprehensive home inspection done, they do not carry it out themselves, stating that a home inspection will only occur if you arrange for one. FHA does not perform a home inspection.

A home inspection is carried out by a licenced inspector and you must arrange for a home inspection yourself should you want your prospective home evaluated more comprehensively than what an appraisal might offer.

Therefore, if youre in doubt whether its necessary to get a home inspection for an FHA loan approval, you can rest easy that it isnt, however, you might still want to consider getting one done.

There are a few reasons why you should get one done. After all, a home is a huge investment and you should know the true condition of the property and how much further investment it may require repairing or replacing certain things.

Another reason why you might rethink the idea of not having a comprehensive and independent home inspection is that it only cost a few hundred dollars.

Sure, budget might be tight, and you may not want to roll out a few hundred bucks, but at least youll know exactly what youre getting into when buying the property.

Think of it as an insurance of sorts from future, potentially unwanted surprises that you might not be happy to uncover later.

Remedies For Properties Below Minimum Standards

There are options for homebuyers who have fallen in love with a property that has one of these potentially deal-killing problems.

The first step should be to ask the seller to make the needed repairs. If the seller can’t afford to make any repairs, perhaps the purchase price can be increased so that the sellers will get their money back at closing. Usually, the situation works the other way aroundif a property has significant problems, the buyer will request a lower price to compensate. However, if the property is already priced below the market or if the buyer wants it badly enough, raising the price to ensure the repairs are completed could be an option.

If the seller is a bank, it may not be willing to make any repairs. In this case, the deal is dead. The property will have to go to a cash buyer or a non-FHA buyer whose lender will allow them to buy the property in the present condition.

Many homebuyers will simply have to keep looking until they find a better property that will meet FHA standards. This reality can be frustrating, especially for buyers with limited funds and limited properties in their price range.

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report with the Consumer Financial Protection Bureau or HUD.

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