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.
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.
Homes that may not pass an FHA inspection
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.
FHA Appraisal Inspections are only looking for health and safety issues. The most common issues are peeling exterior paint, handrails, smoke detectors, and the location of the well and septic.
Is It Hard to Pass a FHA Inspection? As long as the property meets the 3 minimum standards set by the HUD, it shouldn't be hard to pass a FHA inspection. To increase the property's chances of passing, prepare for the FHA inspection in advance. Check the property for hazards, broken systems or parts, and quality issues.
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.
A home doesn't have to “pass” an inspection in order for a sale to take place, but rather, a home inspection is an essential overview of a home's condition at the time of the inspection. No home is perfect, and buyers should always be prepared to discover the maintenance needs of their new homes.
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.
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.
The above issues might seem concerning but, according to Fannie Mae, “the vast majority of appraisals confirm contract price.” In fact, they come back low less than 10% of the time. So, chances are, you won't run into this issue.
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 U.S. Department of Housing and Urban Development (HUD) wants to make sure you invest in a home that has long-lasting potential for your enjoyment and eventual resale. As such, HUD has strict guidelines that enforce which homes you're eligible to buy with an FHA loan. An FHA-approved home meets these guidelines.
Some lenders, including those offering FHA loans, might not approve your request for a mortgage if the home you're buying has serious mold issues. You might have to shop around for a lender if the home you're buying has significant mold issues.
Damaged pipes, malfunctioning water heaters, and backed-up sewage systems are commonly found in home inspections. Older homes carry pipes that are outdated and prone to failure. Home inspectors will report these incompatible plumbing materials, as well as any ruptures, leaks, or backups in a home's sewage system.
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.
What happens if an FHA appraisal fails? If the property fails to meet minimum property standards, the appraiser will note the deficiencies in their appraisal report. For the loan to proceed, the lender will require the defects to be addressed to get the home to a passing standard.
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.
FHA loans are not permitted for condo hotels, bed-and-breakfasts, or other “occasional occupancy” rental situations. Your dream home may not be perfect; it may require repairs or corrections to be approved for an FHA mortgage.
It will take about two to four weeks to schedule and complete the FHA inspection and appraisal of the home, though the inspection itself will only take a couple of hours. The FHA has strict standards when it comes to the condition of the property you are purchasing with the loan.
Typically the seller will pay for the repairs required by the appraiser (that's who decides which repairs are required based on the FHA min property standards).
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.