An FHA home appraisal is ordered by the lender and paid for by the buyer.
No appraisal waiver will be granted unless a prior appraisal for the subject property can be found in Fannie's and Freddie's databases. The prior appraisal must have a “low CU” score (or no “overvaluation flag”), and it must be over 120 days old.
The FHA flip rule and the requirement for a second appraisal are related to certain restrictions on financing recently sold or flipped properties. Under the FHA flip rule, if a property is being resold within 90 days of its acquisition by the seller, the lender may require a second appraisal.
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.
If your appraised value is lower than the agreed upon sales price, you'll have to make up the difference in cash, or cancel the deal.
Whether you're interested in a listing or touring an open house, here's a list of things buyers can look for that may be considered red flags to an FHA appraiser: Missing handrails. Cracked windows. Termite damage.
If anything major happens that could affect the safety or health of an occupant, the appraisal is failed, and the issues need to be rectified before the mortgage can close. This could be anything from exposed floorboards, missing handrails to chipping paint in a house built before January 1, 1979.
The appraisal report must be submitted to the FHA within 10 business days of the inspection. The underwriting review could take a few days to a few weeks depending on the lender's workload. The loan approval process will proceed once the underwriting review is complete.
They check for the structures quality, the interior and exterior condition, the state of fixtures and systems and the condition of the lot. Market research: Appraisers research selling prices for comparable homes by reviewing homes that closed in the same general area and typically closed during the past six months.
Part 1 - The 90-day flip rule
It states that the seller must have owned the property for more than 90 days before a new purchase contract can be written for a buyer using an FHA loan. If this time has not passed, the parties must wait until the 91st day to write the contract.
There's no outright rule against using an FHA loan to purchase a home that was sold within the past 91 – 180 days. However, there are certain qualifications you'll have to meet if you want to buy a home that was sold 3 – 6 months ago.
When you buy a “flipped” home, your lender must pay for a second appraisal of the home that includes an inside inspection. The lender cannot charge you for this second appraisal.
“The Appraiser is not required to provide the appraisal to the new Mortgagee. The client name on the appraisal does not need to reflect the new Mortgagee. If the original Mortgagee has not been reimbursed for the cost of the appraisal, the Mortgagee is not required to transfer the appraisal until it is reimbursed.”
While it's always great for the property appraisal to come back higher than the amount you agreed to buy it for, this is no way affects the loan amount you need to qualify for, or the down payment you need to close on the mortgage loan. Both conventional and unconventional mortgage products offer similar requirements.
If the appraisal sets the home value at less than your offer amount, however, you won't get a loan that covers your offer price—even if you can put down 20% of the offer price and the lender has preapproved you for a loan that covers that amount.
Water pressure must be adequate for the house. Appraisers flush toilets, turn on all faucets and ensure that both hot and cold water are working.
If a report includes two or more indications of value that are significantly different from each other and they are averaged to get to the conclusion of value without any further explanation or support, that may be a red flag.
NOTE: If the 'attic' or crawl space accesses are not readily accessible, you should take photos showing what you observed relative to where those are located, and also include an explanation of why a required inspection of an inaccessible space was not done. That is acceptable to FHA.
Closing in 30 days is ideal, but it's usually only possible if the buyer's financial readiness isn't a barrier and no issues are discovered during the appraisal and inspection of the seller's home. Standard mortgage loans took an average of 49 days to close in September 2021.
Your lender must provide you with a copy of your appraisal and any other written valuation promptly upon its completion or no later than three business days before closing, whichever is earlier. Your lender may provide the appraisal or evaluation to you by mail, electronically (for example, by e-mail), or in person.
How long is an FHA appraisal good for? FHA appraisals are valid for up to 180 days. An updated appraisal is valid for 240 days to one year after the initial appraisal report.
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.
If the appraised value is well below the sale price, you may be better off not buying the home. A home can fail an appraisal if it doesn't meet the standards for the loan. In this case, the lender may decide that problems with the home's condition are too extensive to repair and may reject the home.