When you purchase a home, you want to have it inspected to ensure that it is safe and in good condition. If you are securing FHA financing, you are not required to have FHA inspectors come through your property, but the FHA does highly recommend it. Even if you do not have an actual inspector come through the property, the FHA appraiser’s job is to not only determine the appropriate value for the property, but also to ensure that it does not have any severe deficiencies that are going unseen and that HUD’s interest in the property you are purchasing is protected. The analysis prepared by the appraiser will ensure that all FHA criteria are met in order to meet the property requirements set forth by the FHA.
HUD requires inspection of the property because the home is the collateral for the funding that the FHA is guaranteeing. If you were to foreclose on the property, the bank would have possession of it to sell it to someone else. If they have a home that does not meet city/county requirements or is in poor condition, it would be much harder to sell and would require the bank to take a serious loss. Having FHA inspectors take a look at the home and ensure its safety and stability is a way to protect both the borrower and the bank.
The FHA looks for 3 things in a property: safety, security, and soundness. This means that the home will not pose a threat to any occupant’s health or safety and it does not contain any physical issues that could render the house ineffective. By requiring appraisals/inspections of the property, you are guaranteed to be moving into a safe, stable home.
The inspection that the FHA appraiser begins with is the site itself. This includes an analysis of the topography, soil, off-site improvements, easements, and encroachments.
- Topography – The site grading is an integral part of the inspection as it helps to determine if the home will be subjected to water damage in the basement, crawl space, or difficulty with sewage. The main priority to get approved for an FHA loan is to determine if the foundation or any area near the foundation is free from seepage. If it is not, it needs to be determined that the water is being relocated away from the home to prevent damage.
- Soil – The soil is a part of the site, but requires its own inspection. Proper soil draining, rock formations, and any adverse conditions that may affect the foundation of the home should be inspected.
- Off-site Improvements – Any improvements that are near the home, but not directly on it should be inspected. This includes curbs, driveways, and aprons – anything that would be within the boundaries of the home but not directly attached to it. Care should be taken to determine if any future plans are in the works from the governing agency regarding any of these areas as well.
- Easements – The presence of any easements should be noted and inspected to ensure that they are not going to cause a problem with the home ownership down the road.
- Encroachments – Typically encroachments are not allowed for FHA financing. The only exception to the rule is if there is a perpetual encroachment easement filed with the county and it is provided to the inspector and/or underwriter.
Exterior Features of the Home
The exterior of the home will have to undergo inspection in order to determine the eligibility of the loan for FHA approval. A few of the things covered include:
- Roofing – The roofing must be in good condition with all shingles intact. In FHA terms this means that it must have a minimum of 3 years’ worth of life left. If you reside in an area where there is a great deal of rain or snow, the inspector will look for water damage and the presence of leaks. There cannot be more than 3 layers of roofing present either.
- Attic – The attic must be easily accessed and ventilated. There should not be any holes or damage to the support structures and there should not be any water damage.
- Foundation – There cannot be any cracks or leaks in the foundation.
- Location – If the property is located near landfills, areas with hazardous items, or is surrounded by pools of harmful chemicals or even standing water, it will not be eligible for FHA financing.
Interior Features of the Home
The interior of the home will undergo an extensive inspection in order to determine if the home is worthy of FHA financing. The areas inspected include:
- Framing – All framing must be in good condition without any major cracks. There should also be no visible holes, damaged walls, or any type of water damage.
- Basement – The basement must have easy access that is not blocked. There should not be the presence of any water damage, nor should there be any major cracks that compromise the integrity of the structure.
- Crawl Space – The crawl space should be easily accessed and ample space to perform any necessary maintenance. The support beams should be intact and there should not be any signs of dampness or water damage.
- Heating – The furnace should be in good, working condition without any loud noises, odd smells, or any deterioration. There should be a main breaker that can shut off the electrical to the house. All rooms should be able to be easily heated.
- Electrical System – All electrical systems should be in good, working order. All outlets should be functional, electrical switches should work, and all wiring should be in good condition. There should not be any exposed wires or any sparks/issues with any outlets.
- Plumbing – The water pressure should be adequate; hot water should be working; toilets should be in good condition and working; and there should not be any leaks in any of the plumbing including showers and tubs.
- Paint – All paint should be in good condition. If the home was built before 1978, any chipped pain inside or outside is unacceptable. If the home was built after 1978, chipped paint outside is unacceptable.
- Water Heater – The water heater must meet with the particular city or county codes for the area the home resides.
The FHA does not care about cosmetic issues; their main concern is the health and safety of the occupants in the home. Following are some concerns they would have with a home if these issues were present:
- Issues with stairs such as missing handrails or damaged steps
- Doors that do not work
- Windows that are cracked or broken
- Any type of leaks
- Carpeting that is excessively soiled
- Presence of termites and termite damage
- Any type of trip hazard
In addition, the FHA will look for any type of nuisance issues. These things include:
- Located close to hazardous waste
- Excessive traffic
- Excessive noise (airport, train, etc.)
- Located near power lines
- Located near radio or television towers
In general FHA inspections help to prevent the sale of homes with any of these issues. If you happen to fall in love with a home that gets declined for FHA financing, there are options. Sometimes the seller is willing to fix the problems, which is the easiest solution. If not, it is sometimes possible to increase the selling price so that the issues get fixed and the appraisal is passed and the seller still gets his money back from the repairs.
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