A majority of the time, whether you are purchasing or refinancing, you will need to pay for an appraisal on the property being mortgaged. This is to ensure the bank that the property is worth the amount of money that you state and that the loan-to-value ratio is within the guidelines. When you are obtaining an FHA loan, the appraisal plays an even more important role. Aside from determining the value of the property, the appraisal is meant to help determine the soundness, security and safety of the property. There are certain requirements that every home needs to meet in order to surpass the FHA expectations.
Cosmetic Issues are not a Concern
The strict guidelines of the FHA appraisal do not mean that the home must be in pristine condition, similar to the way that it was when the house was first built. Conditions that are considered cosmetic and are not interfering with the function or soundness of the home are typically overlooked. This can include conditions, such as a dented exterior door that still opens and closes properly or damaged counter tops in the kitchen or bathroom that are structurally sound. Issues that require repairs that only fix the appearance of items in the home do not affect the FHA appraisal.
Utility Issues are a Big Concern
One major concern that the FHA appraiser will thoroughly inspect is the condition of the electricity in the home. If there are any wires that look questionable or areas of the home that do not receive proper heat, the loan will not be approved. These conditions pertain to the safety of the home and will not pass the inspection. In many areas, even a non-working central air conditioner could pose a problem with the loan. This will depend on the appraiser, lender and the individual city codes. Typically any major utility that is not fully functioning could delay the loan or even cause it to be declined.
Roofing must be Adequate
No home seller wants to hear that they have to replace the roof in order to sell the home, but the FHA is very strict about this guideline. The appraiser will inspect the roof and its plausibility for lasting at least another two years. This is done by determining the layer of roofing material currently on the roof, looking for the presence of moisture on the roof itself or in the attic and looking for any obvious defects. Any major issues with the roof could result in a denied loan until the roof is completely replaced.
Structural Damage is not Allowed
Structural damage is just as detrimental to a loan as an inadequate roof. Structural damage can occur in a variety of ways including termite damage, mold or mildew growth, asbestos or inadequate construction of the home. The structure of the home must be proven to be sound enough for the home to be safe to live in for the foreseeable future in order to be approved for an FHA loan.
Other Laws Play a Role in FHA Loans
Sometimes, even if the property seems to pass all of the strict guidelines of the FHA loan, there are other laws that pertain to the situation, resulting in a loan denial. The scope of the issues and how they pertain to the federal, state and local laws might need to be addressed with a home inspector, as they know the laws and regulations rather well. Each area has their own building codes that they must abide by, which will play an important role in the approval or denial of FHA loans. If a home has an electric box or other utility that does not pass the area’s code, then it will not be approved for an FHA loan until the problem is resolved, which in many cases is not an option on the seller’s end, making the deal dead in the water for anyone trying to obtain an FHA loan.Click to See the Latest Mortgage Rates»