You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
The overall structure of the property must be in good enough condition to keep its occupants safe. This means severe structural damage, leakage, dampness, decay or termite damage can cause the property to fail inspection. In such a case, repairs must be made in order for the FHA loan to move forward.
FHA appraisal and inspection checklist
Must have an undamaged exterior, foundation and roof. Must have safe and reasonable property access. Must not contain loose wiring and exposed electrical systems. Must have all relevant utilities, including gas, electricity, water and sewage functioning properly.
Health and safety concerns: Properties with potential health and safety hazards, such as lead-based paint, asbestos, or mold, may not qualify for an FHA loan. The FHA prioritizes the well-being of borrowers and aims to ensure that the homes they finance are safe and healthy environments for residents.
In 2022, 9.1% of applicants were denied a home-purchase loan, according to data collected under the Home Mortgage Disclosure Act. However, some loan programs have a higher denial rate than others. Here's how it breaks down. Federal Housing Administration loans: 14.4% denial rate.
Although the FHA appraisal guidelines have developed a reputation for being unnecessarily strict, the standards have been relaxed. Today, most FHA appraisal requirements are easy to meet or relate to major hazards most home buyers and homeowners shouldn't ignore under any circumstances.
Similar to kitchens, bathrooms are inspected for quality, condition and materials. An appraiser looks at whether it's a full or half bath, whether it has a decent shower, updated lighting, quality counters and looks for signs of mold.
Potential Red Flags Outside the House
Are there flat spots where water pools? Are there missing shingles? When was the roof replaced previously? Problems here can be a serious dealbreaker. Foundation: The entire home rests on the foundation, and repairs aren't often easy or affordable.
The FHA appraisal process typically takes around 2 to 4 weeks to complete. However, the exact timeframe can vary depending on factors such as the property's location, complexity, and the workload of the FHA-approved appraiser.
Common reasons for FHA loan denial include low credit scores, high debt-to-income ratios, insufficient income, insufficient funds for a down payment, and properties not meeting FHA guidelines.
The majority of those problems were minor and did not delay closing. However, about a quarter—24%—of new home buyers say their home did not pass the first inspection. Thirty-two percent said the inspector found minor issues. Thirty percent of buyers said their home passed the first inspection.
Although the FHA minimum property requirements are strict, they're not prohibitive. In fact, most homes will pass an FHA appraisal, so don't let these requirements scare you off FHA loans.
An example of improper communication would be asking an appraiser to provide a valuation that matches the asking price of a particular home. Another example could be telling an appraiser he or she will not receive future assignments if the appraisal does not facilitate a transaction.”
The appraiser will turn on faucets to make sure that the water heater is actually heating the water. With regards to the plumbing systems, the appraiser must flush the toilets and operate a sample of faucets to check for water pressure and flow.
An appraiser will likely look in your closet to measure it to determine how big is it as larger closets and home with more square footage are more valuable.
Common issues that may cause a property to fail an FHA appraisal include: Significant structural problems. Peeling paint. Safety hazards like exposed wiring or lack of smoke detectors.
During the appraisal, a professional will assess the home's condition and determine its fair market value. An FHA appraisal can require repairs before the loan is approved. That's more strict than a conventional loan.
The time it takes to close on a house after an appraisal varies. Usually, the FHA loan process takes anywhere between 30 – 60 days. However, appraisal problems can prolong this timeline. The FHA allows up to 120 days for necessary repairs to be made.
The property needs to be free of known hazards that affect health and safety, the home's use, or may affect the structural soundness of the house and its marketability. These include, but are not limited to: Toxic chemicals. Radioactive materials.
For example, appraisers usually do not include free-standing refrigerators, stoves, washers, or dryers in FHA appraisals because they are considered personal property and lenders do not want them included.
Underwriters verify your income, assets, and debts and review information about the property to determine if you qualify for a home loan. You can speed up the underwriting process by providing all the necessary documentation during the application phase and communicating with your lender.