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Basic FHA Appraisal Guidelines

Will this help my eligibility for an FHA mortgage loan?

FHA appraisal guidelines must be adhered to for all FHA mortgage loans. Discover the best list of basic guidelines for those appraisals on FHA home loans.

FHA home loans often make a perfect mortgage program for the first time home buyer. FHA always requires that FHA appraisal guidelines be adhered to.

These guidelines help a lender to know the true value of a property if it were to be bought outright. So, an FHA appraisal protects the lender, not you. These guidelines are like a scale balancing the house with the loan amount.

Why Needed With FHA Home Loans

FHA mortgage loan requires only 3.5% down payment from buyers, and the mortgage industry knows that people who cannot pay at least 20% down on an FHA-sized property are, on average, greater default risks.

When FHA appraisal guidelines are followed, the lender knows objectively how much they would potentially lose if you defaulted. FHA home loans are not granted to anyone unless this appraisal is carried out and the home meets with FHA appraisal standards.

You need to know what the FHA appraisal guidelines are so that you know if you will be able to get your loan. Lets take a look at them.

FHA Mortgage Loan Appraiser List

  • seller concessions and financing data
  • appliances that come with the house
  • condition of the roof
  • condition of basement or crawl space
  • electrical boxes and wiring
  • wood stove, solar heat, or furnace
  • sewer systems, wells, and water quality

More FHA Appraisal Guidelines

Seller Concessions and Financing Data

First there are the seller concessions and financing data. You have to disclose all of this to the FHA appraiser. Sales concessions include loan origination fees, loan discount or interest rate buy-down points, closing cost or down payment assistance, builder incentives, payment of condominium fees, monetary gifts or personal property given by the seller or any other party, such as your relatives or parents, involved in the transaction.

Appliances That Come With The House

Next, dishwashers, microwave ovens, ranges, and washers/dryers that are coming with the house may be considered part of the real estate, but nothing else should be. If anything else of monetary value is coming with the property, a dollar for dollar reduction in the amount of the mortgage (the borrowed amount) will be given to you by the FHA lender. FHA appraisal guidelines will be used to figure out these values.

Condition of the House

fha appraisal guidelines

The roof on the house that you are looking to buy has some complex FHA appraisal guidelines. The appraiser must determine that the roof prevents moisture leakage into the house, and will provide present and future durability as well as utility and economy of maintenance (it must also have no more than two layers). The roof has to be determined to have at least two years of this conditioning left, or else the FHA appraiser will demand that it be rebuilt or repaired at your expense (which you can pay at closing or roll into the loan, thus raising your loan amount and the minimum amount of your down payment). You could also use this to negotiate a lower price on the home.

Now, if the home you wish to get an FHA loan for is a condominium, there is no roofing inspection. But, if it is a small four-unit building or a townhouse type of unit, there is a roofing appraisal required. If the property has an attic, it too must be inspected by the appraiser.

Other Appraisal Guidelines for the FHA Mortgage Loan

Condition of the Basement or Crawl Space

The basement of the home must be inspected with FHA appraisal guidelines too. This is to ensure that there is sufficient structural integrity and no water leakage or dampness (this includes any ponding). The hot water heater, furnace, and any other components or units there will be inspected too. You can have a sump pump in the basement as long as it does not use an extension cord.

If the property has crawl spaces, there needs to be adequate access to them and they have to be properly vented. There cannot be excessive dampness or water ponding in the crawl spaces.

Electrical Boxes and Wiring

Your electrical boxes will be inspected. There will be a related inspection done to ensure that all habitable rooms in the house have adequate heating (or cooling in very hot areas where summer heat can cause death). If you have any doubts about the property's electrical wiring, pay an electrician to go over it for you and make needed changes in advance.

If the property uses wood stove heat or solar heating, there must still be a permanently installed heating system that can faithfully provide a minimum of 50 degrees Fahrenheit in each habitable room in all seasons. Wall heaters designed to code are acceptable. Floor heaters, however, if not brand new could cause a failed inspection. Any propane tanks must be located a safe distance away from the house.

Sewer Systems, Wells, and Water Quality

Sewer systems, wells, and water quality will all be inspected too and must pass the complex FHA appraisal guidelines. Only homes that comply with them all will be eligible for FHA home loans.

One of the new guidelines for the appraisers is they cannot be affiliated with the lending agencies. They are required to have familiarity, experience, and knowledge in the geographic location of the home being appraised. Last buy not least, they need to be certified to do FHA appraisals.

Keep in mind, this appraisal is not a home inspection. It also does not promise the home is flawless. However, it does ensure the home is safe and sound. That is why the appraiser may require some action to be taken on the home. the buyer may receive a list of repairs and the seller may be required to make those repairs in order to meet the FHA appraisal guidelines.

So here you go, a list of the basic guidelines. Periodically these standards are revised and can be area specific. So expect a few surprises. But do not let that stop you. Go ahead, take the next step, get the appraisal. Soon you will be in that first home!

Do You Have More Questions?

Would you like to find out which FHA program is the best? Best FHA Home Loans explains two awesome options.

Perhaps you have more questions before you can proceed. Have a Question provides an opportunity to pick the brain of an expert in the mortgage business. Plus you can see questions and answers provided by others.

Leave FHA Appraisal Guidelines and return to Appraisal Basics main page.

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