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When obtaining an FHA home loan, not only does the lender look
at your credit, income, debt ratio, etc., they also look at the home you plan on
buying. An FHA
appraisal will be required, and the HUD approved appraiser will not only
determine the homes current value, but they will check to make sure the home
meets minimum FHA property guidelines.
The following rules will apply to what does and does NOT need to
be in working order or corrected prior to purchasing the home.
An FHA 203k loan can
potentially also be used to repair items requiring repair that can not be
repaired prior to purchasing the home. FHA 203k loans are a whole
different subject, and not to be taken as a quick alternative. Contact us at
(651) 552-3681 for information on 203k loans BEFORE buying a house if you need
to go that route.
NOTE: MOST HOMES PASS FHA
APPRAISALS WITH NO ISSUES WHATSOEVER. Many have only a few very minor issues
that are easily addressed. Therefore FHA loans should NEVER be something to be
afraid of when buying most homes.
Roofs and Attics
FHA guidelines need roofs to have at least a remaining useful
life of two years. If this requirement cannot be met, the appraisers are
responsible for requiring the roof to be repaired or re-roofed. No more than
three layers of roofing are permitted. If there are more than two layers of
existing roofing, and repair work is required, 100 percent of the old roofing
must be removed. If the property is four units or less, is part of an
association and has its own roof, the roof must be inspected. In most cases
attics are to be inspected for signs of leakage, structural deficiencies, holes
or other problems.
Kitchens and Baths
The FHA appraisal guidelines for appraisers regarding kitchens
and bathrooms are very basic. Besides having an adequate and acceptable source
of water and fixtures, the requirements include checking that the toilet
functions properly and is free of leaks. The appraiser must also examine
fixtures and check for structural damage and standing water, must inspect sewer
or septic systems, look for leaking or badly corroded water lines and check for
low water pressure.
Basements and Crawl Spaces
FHA appraisers must evaluate basements for signs of water,
dampness or structural problems. Under guidelines current as of 2009, sump pumps
are allowed as long as they work properly. The pump power supply may consist
of a factory electrical cord connected to the proper electrical receptacle or
hard-wired according to acceptable wiring standards. Properties that have
accessible crawl spaces must be inspected if there is enough space for at least
the appraiser's head and shoulders to enter the area. The appraiser will look
for evidence of wetness or standing water.
Electrical panels can consist of circuit breakers or fuses. The
minimum amount of power required is 60-amps. This is only acceptable as long as
it seems adequate for standard appliances, and usually in an old small home. Knob and tube electrical wiring is
permitted with 60-amp service. Homes with electrical heat should have 200-amps.
Under FHA appraisal guidelines for appraisers, they must look for damage
receptacles, missing cover plates and worn and exposed wires.
All habitable rooms must have a source of heating. Although the
heating equipment is not required to be located in the room, each room has to
receive sufficient heat. If the primary heating unit cannot be extended into a
room, a properly wired baseboard unit, powered by electricity and controlled by
a thermostat, is accepted under the guidelines. Adequate heat is defined as a
minimum of 50 degrees Fahrenheit in areas used for living and where plumbing
systems are located. The occupants must be able to control the main heating by a
thermostat. . Free standing wood stoves are problematic (think small cabin).
Septic Systems, Drain Fields, and Wells
FHA does not automatically check to see if these items are in
working order. If the appraiser is told of an issues, sees it in the listing, on
the purchase agreement, or notices an issue (like sewage in the drain field,
back up sewage), then they will REQUIRE a well and septic certification.
Same with any well issues. Any noted well issues will require a water test. If
the septic system is currently failing, it must be repaired. Some systems are
working, but are not up to current code, so they must be replaced if the home
transfers owners. Many times the county will mandate the systems be brought up
to code, and give the new home owner a year or so to do the work. Updating
working but non-compliant systems DO NOT have to be done prior to purchasing the
If the home is OLDER that 1978, all chipping and peeling paint
ANYWHERE on the property must be removed and repainted. This is because
paint made prior to 1978 may have contained lead, which is a hazard to your
health. This includes exterior building and detached garages, and both interior
and exterior paint. Note that the whole house or room doesn't necessarily
need to be painted. Just the peeling and chipping paint.
Some other FHA appraisal guidelines for appraisers pertain to
requirements on items such as hot water heaters, pest control, flood control and
zoning. There are also certain conditions regarding environmental hazard that
FHA appraisers must be cognizant of, including the following: asbestos, mole,
radon, lead paint and excessive noise. Underground storage tanks and overhead
high voltage transmissions lines and towers are also areas of concern.
FHA also provided the following list of conditions that
will require automatic repair for existing properties:
Inadequate access/egress from bedrooms to exterior of home
Leaking or worn out roofs (if 3 or more layers of shingles
on leaking or worn out roof, all existing shingles must be removed before
Evidence of structural problems (such as foundation damage
caused by excessive settlement)
Defective paint surfaces (chipping and peeling paint) in
homes constructed pre-1978
Defective exterior paint surfaces in home constructed
post-1978 where the finish is otherwise unprotected.
Health and Safety
FHA underwriting guidelines require that lenders review the
appraisal to see if the appraiser has made note of property conditions that will
affect the health and safety of the occupants. Mold for example is a health
issue, and must be removed.
Overall Structural Soundness
FHA underwriting guidelines require that lenders review the
appraisal to see if the appraiser has made note of property conditions that
jeopardize the soundness and structural integrity of the property. When an FHA
appraisal is done on a home, they are looking to make sure that their arenā€™t any
safety hazards and that the house is structurally sound.
ITEMS NOT REQUIRED TO BE
In Mortgagee Letter 05-48, FHA provides the following examples
of minor property conditions that do not
require automatic repair for existing properties, although we still
find some appraisers asking for these repairs.
Cracked or damaged exit doors that are otherwise operable
Cracked window glass
Defective paint surfaces in homes constructed AFTER 1978
Minor plumbing leaks (such as leaky faucets)
Defective floor finish or covering (worn through the finish,
badly soiled carpeting)
Evidence of previous (non-active) Wood Destroying
Insect/Organism damage where there is no evidence of unrepaired structural
Rotten or worn out counter tops
Damaged plaster, sheet rock or other wall and ceiling
materials in homes constructed after 1978
Trip hazards (cracked or partially heaving sidewalks, poorly
Crawl space with debris and trash
Lack of an all weather driveway surface
Started on your FHA Loan in MN, WI, SD