So if you are getting an FHA Loan, make sure the Property you are looking at does not violate the Rules of your Loan. Don’t just automatically expect the Seller to fix the items in question. Make sure you have a Buyer’s Agent to guide you.
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What Does the Appraiser Look for?
So, what does the FHA appraiser look for during this process? The primary areas of inspection are the roof, the foundation, lot grade, ventilation, mechanical systems, heating, electricity, and crawl spaces (when present).
Here are some of the key inspection areas required by HUD:
- HUD’s primary concern is the health and safety of the home buyer who will actually live in the house. Thus, most of their appraisal / inspection checkpoints have to do with health and safety aspects of the property. Above all, the home must be habitable and comfortable, without any potential hazards to the occupant.
- The lot should be graded in a way that prevents moisture from entering the basement and/or foundation. In other words, the lot should be sloped to allow water to drain away from the house — not toward it.
- All bedrooms should have egress to the exterior, for reasons of fire safety. A bedroom window will suffice, as long as it’s large enough to allow egress.
- Many homes built before 1978 still contain lead-based paint, which is a potential health hazard. In these homes, the appraiser will check for damaged paint (peeling, chipping, etc.). Such conditions must be corrected before the loan will go through.
- All steps and stairways must have a handrail for safety. This is a commonly cited discrepancy during FHA appraisals.
- The heating system must be sufficient to create “healthful and comfortable living conditions” inside the home.
- The roof should be in a good state of repair and must keep moisture from entering the home. It should “provide reasonable future utility, durability and economy of maintenance.”
- The foundation should be in good repair and able to withstand “all normal loads imposed” on it.
According to HUD Handbook 4150.2, the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.”
The bottom is that if something poses a threat to the health and safety of the occupant, or to the structure itself, it will probably be marked as “subject to repair.” This is the central theme that runs throughout the appraisal guidelines.
Making Repairs After the Inspection
There’s a common misconception that FHA appraisals are unnecessarily strict, and that any inspection “hits” will end your chances of getting a loan. This is incorrect. In fact, the health-and-safety aspects of the FHA appraisal have gotten a bit more relaxed over the years. Additionally, most discrepancies are fully correctable. If they are corrected before the final inspection (when the appraiser follows up on the hit list), the loan can still move forward.
In most cases, the only “deal breakers” are serious safety issues that cannot easily be corrected. An example would be a bedroom with no windows or doors, and therefore no egress in the event of a fire. Another example would be an older home with a deteriorated roof and holes in the floor (i.e., a fixer-upper). In both of these cases, the discrepancies (A) create hazardous conditions and (B) cannot be easily fixed. These are the types of issues that send FHA loans off the track.
In most cases, however, flagged discrepancies can be resolved fairly easily — if the seller is willing to fix them. If the items are repaired or corrected to the appraiser’s satisfaction, the deal can move forward.
The official FHA appraisal guidelines for 2017 state this clearly: “Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants.”
Read more: http://www.fhahandbook.com/appraisal-guidelines.php#ixzz5QKLthsiW
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