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FHA
Home Loan Appraisals - Home Inspections
When
applying for an FHA insured home loan, the borrower(s) must sign a
disclosure that details
the importance of a home inspection.
In previous sections, we learned that FHA offers a detailed home
appraisal that covers many
items often included in a home inspection. However, an FHA appraisal
is not a home inspection.
An appraisal is only an estimate of the market value of a property.
Furthermore, FHA does not
guarantee the value or the condition of the home. If a home buyer
finds problems or defects after
the closing, FHA will not give the home owner money for repairs or
buy back the property.
A home inspection gives the buyer more detailed information than an
appraisal--information you
need to make a wise decision. In a home inspection, a qualified
inspector takes an in-depth,
unbiased look at your potential new home to:
•
evaluate the physical condition: structure, construction, and
mechanical systems
• identify items that need to be repaired or replaced
• estimate the remaining useful life of the major systems,
equipment, structure, and
finishes
A home
inspection gives the buyer an impartial, physical evaluation of the
overall condition of the
home and items that need to be repaired or replaced. The inspection
gives a detailed report on
the condition of the structural components, exterior, roofing,
plumbing, electrical, heating,
insulation and ventilation, air conditioning, and interiors.
The cost for a home inspection is only a few hundred dollars (which
the seller may be willing to
pay for). Most importantly, hire only home inspectors that have the
American Society of Home
Inspectors (ASHI) designation. These are inspectors that have met
the rigorous standards of
education, professionalism and expertise set by ASHI in order to
attain that designation.
FHA Home Loan Appraisals - Roofs and Attics
The following are the general guidelines required for a property.
Any condition not met by the list
below may require the property to be repaired in order to meet FHA
appraisal guidelines. Refer
the HUD handbook 4150.2 for more information.
Roofs and Attics:
The roof must prevent moisture from entering the home and provide
reasonable future utility,
durability and economy of maintenance. The roof should have a
remaining physical life of two
years. If the roof has less than two years remaining life, the
appraiser must call for re-roofing or
repair.
FHA will accept a maximum of three layers of existing roofing. If
more than two layers exist and
repair is necessary, all of the old roofing must be removed as part
of the re-roofing.
Roofing on slopes of 2.5/12 pitch or less must be installed by a
licensed roofer using built-up
roofing that meets the Uniform Building Code.
All flat roofs require a roof inspection. If the subject property is
part of a large multifamily
building (i.e. condo), no roof inspection is needed. If the building
is a small 4 unit building or
townhouse type unit covered by a condo association with the subject
property having its own roof,
then a roof inspection is required.
The FHA appraisers are required to inspect the attic area unless the
property is a mobile home or
dwelling with little or no attic (due to the interior roof slope).
The appraiser will note any evidence of holes in the roof/ceiling,
the condition of the support
structure, any significant water damage that is visible from within
the interior and evidence of
ventilation by vent, fan or window.
FHA Home Loan Appraisals - Kitchens and Bathrooms
The following are the general guidelines required for a property.
Any condition not met by the list
below may require the property to be repaired in order to meet FHA
appraisal guidelines. Refer
the HUD handbook 4150.2 for more information.
Kitchens and Bathrooms:
A property
must have adequate water supply and fixtures to support its use.
This guideline
requires an appraiser to check:
• the function of toilets and observe any evidence of leaks
• for structural damage under fixtures and the presence of puddles
• for any obvious evidence of malfunction of the sewer system
• the sinks and pipes for leaks
• if the home has running water
• any significant drop or limitation in water pressure
An
appraiser may require the repair or replacement of countertops and
flooring wherever
underlayment is exposed or damaged.
FHA Home Loan Appraisals - Basements
The following are the general guidelines required for a property.
Any condition not met by the list
below may require the property to be repaired in order to meet FHA
appraisal guidelines. Refer
the HUD handbook 4150.2 for more information.
Basements and Crawl Spaces:
Basements must be examined by the FHA appraiser for dampness or
wetness, any obvious
structural problems and the condition of the furnace, hot water
heater, and/or other components
located there.
Sump pumps are acceptable to HUD/FHA guidelines provided that they
are properly functioning
at the time of appraisal. The sump pump may be hard wired by an
acceptable wiring method or
may have a factory electrical cord that is connected to a receptacle
suitable for such use. Use of
an extension cord for the sump pump is not acceptable. Though the
sump pump is not a cure-all
for water problems, the appraiser may still elect to reject the
property if there is significant
incurable ponding of water in the basement.
Property owners must insure that there adequate access to the
property's crawl space, clear of
debris, and is properly vented. The appraiser must enter the crawl
space with a minimum entry of
his/her head and shoulders (unless access is not possible, could
damage the property, or an
adverse situation is suspected). HUD guidelines recommend a minimum
height of 18 inches from
the bottom of the joists in order to provide adequate space for
maintenance and repair.
Furthermore, the crawl space must not be excessively damp and not
have any water ponding.
FHA Home Loan Appraisals - Electrical and Heating
The following are the general guidelines required for a property.
Any condition not met by the list
below may require the property to be repaired in order to meet FHA
appraisal guidelines. Refer
the HUD handbook 4150.2 for more information.
Electrical and Heating:
The FHA appraiser should examine the electrical box to ensure that
there are no frayed or
exposed wires. Electrical boxes may be either circuit breakers or
fuses. Existing 60-amp service
is acceptable if it appears that this is adequate amperage for the
appliances present in the
property, or those considered "standard" if the present
appliances appear to be less than found in
the "standard" home. Knob and tube wiring is acceptable if
found to be in good condition and a
minimum of 60-amps. For all electric homes and those with electric
heat, 200-amps is
recommended
In general, all habitable rooms must have a heat source. This does
not mean that each room
must contain a heating device but that each room must receive
sufficient heat. In some situations
where it is not feasible to extend the capacity of the main system,
an electric and thermostatically
controlled baseboard unit is acceptable provided it is permanently
installed with concealed
wiring.
Heating must be adequate for healthful and comfortable living
conditions. This is defined as
providing and maintaining a temperature of at least 50 degrees
Fahrenheit in all living areas and
areas containing plumbing systems. Further more, all permanent
primary heating systems must
be thermostatically controlled and properties with electric heat
sources must have an acceptable
electric service that meets the general requirements of the local
municipal standards.
Wood stoves and solar systems: Homes with wood burning stoves or
solar systems as the
primary heat source must have permanently installed conventional
heating systems that can
maintain at least 50 degrees Fahrenheit in all living areas and
those containing plumbing
systems. These systems must be installed in accordance with the
manufacturer's
recommendations.
Wall heaters: Wall heaters are acceptable as long as they are
installed to code and designed to
heat the size and layout of the entire house.
Floor heaters: Due to the inherit dangers of a floor heater, it is
highly recommended that floor
heaters in need of repair be replaced with another permanent heat
source. They are acceptable
as long as they are properly functioning and meet current code.
Non-conventional heating systems: All non-conventional heating
systems, such as space
heaters and others, must comply with local jurisdictional
guidelines. Often these are not
acceptable as the primary source of heat.
Finally, propane tanks must be a safe distance from the property.
Leased tanks are acceptable
when not offered for sale. Propane fired furnaces located in a crawl
space area is not
acceptable.
Electrical, plumbing and/or heating certifications may be called for
by the appraiser when he/she
cannot determine if one or all of these systems are working
properly. However, the appraiser
should not arbitrarily call for such certifications as they are
still responsible for checking on the
adequacy of these systems at the time of appraisal. If an inspection
is required, it must be done
by a home inspector, an inspector from the local building
department, an FHA compliance
inspector, a professional in the specific field (e.g. electrician,
plumber) or any individual deemed
qualified by the lender's underwriter.
FHA Home Loan Appraisals - Sewer Systems
Public, Community and Individual Sewer Systems:
Public Sewer Systems: Public sewer systems are owned, operated and
maintained by the city,
county or local unit of government with the power of taxation or
assessment. No certification is
required by the appraiser.
Community Sewer Systems: In general, the appraiser must note on the
appraisal the name of
the community system(s). However, the lender must ensure that the
community sewer system is
in compliance with the requirements of the Health Authority having
jurisdiction for satisfactory
operation of the sewage treatment plant and discharge of treated
wastes.
Individual Sewage Systems: For properties that cannot connect to a
public system and are
served by an individual sewage system that is acceptable to the
local health authority, the system
is then acceptable to HUD/FHA. This includes numerous types of
sewage systems including
cesspools, individual pit privies and mound systems.
Certifications are only required if the appraiser suspects a problem
with the system, or problems
are customary in the area. The appraiser will require certification
by the local health authority, a
licensed sanitarian or an individual determined to be qualified by
the lender. Certifications
obtained within three months prior to the appraisal may be
acceptable if the appraiser and other
parties in the transaction do not detect or know of possible
existing problems.
• The
following types of systems are not acceptable:
• Individual septic tank/drain field on a neighboring property
• Individual lagoon-type or other "open" systems
• The property should be rejected if it, or neighboring houses
show indications of, and/or
have had unsatisfactory operation of the sewage disposal system.
• The property should be rejected if inspection reveals repetitive
failure of the subject
system and/or neighboring systems, or in an area subject to flooding
or seasonal high
ground water tables.
Improvements
such as driveways, parking areas, patios, etc. covering the
drainfield are
unacceptable due to the inability for future servicing and should be
removed or the drainfield
relocated.
For distances between water sources and sewage, see the water /
plumbing section.
FHA Home Loan Appraisals - Water Systems
Public, Community, and Individual Water Systems and Shared Wells:
Public water systems are owned, operated and maintained by the city,
county or local unit of
government with the power of taxation or assessment. These systems
do not require
certification.
Community water systems are a central system that is owned, operated
and maintained by a
private corporation or a non-profit property owners association. It
is the lender's responsibility to
ensure that the community system is licensed and adequate to service
the property.
Individual water supply systems (i.e. wells) may be acceptable when
connection to a public or
community water system is not available and there is assurance of a
continuing adequate supply
of safe potable water for domestic needs (to include auxiliary uses
for lawn and garden
maintenance). The appraiser may condition for certifications of
water quality and quantity such
as the appropriate Health Authority approval and pump test.
Individual water wells are owned and maintained by the homeowner,
and are subject to
compliance with all water quality requirements of the local and/or
State Health Authority having
jurisdiction.
As of June 19, 1988, new construction shall have lead-free water
piping. Solder and flux shall not
contain more than 0.2% lead and pipe fittings shall not contain more
than 8.0% lead.
Whenever the property lacks a connection to public water, water
testing is required. If the local
authority is unable to perform the water quality analysis in a
timely manner, a private, commercial
testing laboratory acceptable to the local authority may take and
test water samples. Certification
obtained within three months prior to the appraisal is acceptable if
the appraiser4 and other
parties in the transaction do not detect or know of possible
existing problems.
Well Location: Individual water wells should be checked to establish
the distance from the
septic system. See below
A well located within the foundation walls of a dwelling is not
acceptable. Water which comes
from any soil formation which may be polluted, contaminated,
fissured, creviced or less than 20 ft.
below the natural ground surface is not acceptable, unless it is
acceptable to the local health
authority (certification is required for such cases). Individual
water wells are not acceptable for
individual lots in areas where chemical soil poisoning has been or
is practiced if the overburden of
soil between the ground surface and the water bearing strata is
coarse grained sand, gravel, or
porous rock, or is creviced in a manner which will permit the
recharge water to carry the toxicants
into the zone of saturation.
The following shall be used in establishing the minimum acceptable
distance between wells and
sources of pollution located on either the same or adjoining lots.
These distances may be
increased by either the health authority having jurisdiction or HUD:
Source of Pollution Supplemental Minimum Horizontal Distance (ft)
requirements:
-
Property
line 10 ft
-
Septic
Tank 50
-
Absorption
Field SUP1 100
-
Seepage
Pit SUP1 100
-
Absorption
Bed SUP1 100
-
Sewer
lines (w/ perm. watertight joints)10
-
Other
Sewer Lines 50
-
Chemically
Poisoned Soil SUP3 25
-
Dry
Well 50
-
Other
SUP2
SUP1: This
clearance may be increased or decreased depending upon soil and rock
penetrated
by the well and aquifer conditions. The clearance may be increased
in creviced limestone and
pereable strata of gravel and sand. The clearance may be reduced to
50 ft. only where the
ground surface is effectively separated from the water bearing
formation by an extensive,
continuous and impervious strata of clay, hardpan, or rock. The well
shall be constructed so as to
prevent the entrance of surface water and contaminants.
SUP2: The recommendations or requirements of the local health
authority shall apply.
SUP3: This clearance may be reduced to 15 ft. only where the ground
surface is effectively
separated from the water bearing formation by an extensive,
continuous and impervious strata of
clay, hardpan, or rock.
Individual water wells should be located on the subject property. If
not, they must be on an
adjacent property, and evidence of water rights and ongoing
maintenance must be provided for
acceptance of the well.
Also, possible sources of water pollution from the subject and
adjoining properties must be
considered.
Quantity
of Water: Water quantity is to be certified by either the local
health authority or a
licensed well driller/engineer. The pump test must evidence that for
new well construction the
system is capable of delivering a flow of 5 gallons per minute over
at least of 4 hour period, and 3
gallons per minute over at least a 4 hour period for existing.
Systems should be checked to
establish that adequate amount of water pressure is present and can
be sustained.
Holding Tanks: The use of holding tanks are not considered to be
normally acceptable as the
sole source of water unless there is no other available source of
acceptable water, the use of
holding tanks is "typical" for the market area, the
dependence of a holding tank does not
adversely affect the marketability of the property, there are
readily available sources of hauled
water to serve the property, fire insurance is available at
reasonably affordable rates, tanks are
equipped with a clean-out plug at the lowest point and a suitable
pressure relief valve, and the
tank has a minimum capacity of 500 gallons or larger.
Misc: Wells must be drilled no less than 20 feet deep and cased with
steel or other durable,
leak-proof, and acceptable casing material.
If any of the following items may cause the property to be rejected
or conditioned for certified
compliance:
• Mechanical chlorinators are not acceptable
• Hand-dug wells, "bored" wells, and/or "sandpoint"
wells are not acceptable
• Individual water systems utilizing springs, cisterns, lakes, or
rivers are not acceptable.
Shared Wells: Shared wells may serve existing properties which
cannot feasibly be connected
to an acceptable public or community water supply system. A shared
well shall have a valve on
each dwelling service line as it leaves the well. A shared well
shall service no more than four
properties. A shared well must have a shared well agreement and
shall be binding upon
signatory parties and their successors in title. The agreement shall
also be recorded in local
Deed Records.
FHA Home
Loan Appraisals - Water Heaters
Water heaters:
All water heaters must have a non-adjustable temperature and
pressure-relief valve. It must
comply with local building codes regardless of its location. Rental
water heaters are not
acceptable.
FHA Home Loan Appraisals - Pest Control
FHA requires maximum assurances that a home is free of any
infestation. A pest inspection is
always required for and structure that is ground level or any
structure where the wood touches
the ground. However, structures in a geographic area with no active
termite infestation may not
require a pest inspection.
New Construction: The builder of a new home, proposed construction,
a home under construction
and a home less than one year old must provide a warranty against
termite infestation in a new
home for a minimum of on year.
All chemical soil treatments, bait systems, and chemical wood
treatments must be approved by
the Environmental Protection Agency (EPA) and applied in accordance
with the EPA label
instructions. In some cases where these methods are not feasible,
pressure treated wood may
be used as a measure of termite protection. Also, the use of
post-construction soil treatment
where the chemicals are applied only around the perimeter of the
foundation is not acceptable in
new construction.
Termite
inspections are not required for streamline refinances with or
without an appraisal
FHA Home Loan Appraisals - Security Bars and Smoke Detectors
Security bars: Security bars are acceptable if they comply with
local fire codes.
Smoke detectors: At least one operating UL-approved smoke detector,
acceptable to the local
building and fire codes must be installed in each hallway adjacent
to the bedrooms. On levels of
the home that do not include bedrooms, at least one operating smoke
detector must be centrally
located.
FHA Home
Loan Appraisals - Property Location
The property may not be eligible for FHA financing when it is
subject to hazards, environmental
contaminants, noxious odors, offensive sights, or excessive noises
to the point of endangering
the physical improvements or affecting the livability of the
property, its marketability, or the health
and safety of its occupants and cannot be acceptably mitigated.
Airports: Locations near an airport may be subject to the noise and
hazard of low flying aircraft.
Existing properties are not to be rejected solely based upon the
property's proximity to an airport
unless there is indication that adverse changes in market attitude
is taking place in the area (such
as declining market values due to the noise). Existing homes more
than one year old are
acceptable in a Runway Clear Zones if the buyer acknowledges
awareness of such location.
Homes less than one year old are not eligible.
Railroad tracks and other high noise sources: If the home is over
one year of age, noise
exposure will not result in automatic rejection unless the
environmental noise is a marketability
factor. A site exceeding an average day-night sound level of 56
decibels in normally
unacceptable, though measures may be taken to reduce these levels.
Anything over 75 decibels
is not acceptable. The loan may not close until certification has
been made that the average daynight
sound level is within acceptable levels.
Flood
areas: Homes located in zones "A" and "V" (as
stated on the FHA appraisal) will require
flood insurance. Homes located in zones "B" and
"C" do not require flood insurance. Homes that
require flood insurance and are not located in an area where the
National Flood Insurance
Program is in force are not eligible for FHA financing. New and
proposed construction is not
eligible if any part of the home that is essential to the property's
value and subject to flood
damage are located within the 100 year flood plain. Properties
subject to frequently recurring
flooding, subject to any potential hazard to life and safety or
where escape to higher ground
would not be feasible during flooding conditions are not eligible
for FHA financing.
Overhead high voltage transmission towers and lines: High voltage
lines are those that carry
60 kilovolts or greater. Distribution lines are the common lines
used for supplying power to
housing developments and similar facilities that often carry 12
kilovolts or less. No home may be
located within the designed fall distance of any pole, tower or
support structure of a high-voltage
transmission line, radio/TV transmission tower, microwave relay dish
or tower or satellite dish
(radio, TV cable, etc.). Neither high voltage nor distribution lines
shall pass directly over any
structure on the property (this does not include service lines that
deliver power to the house).
Oil and gas wells and tanks:
Operating
wells: No existing home may be located closer than 300 feet from an
active or planned
drilling site. If an operating well is located in a single family
subdivision, no new or proposed
house may be built within 75 feet of the operating well.
Abandoned wells: Assuming a letter from the responsible authority in
the state government that
states the subject well was safely and permanently abandoned, a home
may be located no closer
than 10 feet from the abandoned well. If no such letter is provided,
the home must be located at
least 300 feet from the abandoned well.
Underground tanks: If an underground tank has been abandoned, its
removal or proper
abandonment is required (subject to applicable requirements and
guidelines for removal).
FHA Home Loan Appraisals - Private Roadways
Each property shall be provided with vehicular and pedestrian access
by a public or private
street. Private streets shall be protected by permanent easements.
Existing or proposed streets at the site shall connect to private or
public streets and shall provide
all-weather access to all buildings for essential and emergency use,
including access needed for
deliveries, service, maintenance and fire equipment.
FHA defines all-weather surface as a road surface over which
emergency and the area's typical
passenger vehicles can pass at all times.
Private streets must be protected by permanent recorded easements
and have joint maintenance
agreements.
FHA Home
Loan Appraisals - Zoning
To be eligible for FHA insurance, a property is to be legal and free
of health and safety hazards
and major structural problems. If the use is not legal, the property
is not eligible for FHA
mortgage insurance until it becomes legal.
FHA Home Loan Appraisals - Personal Property
Items such as ranges, refrigerators, dishwashers, washers/dryers and
microwaves may be
considered as part of the real estate and included as part of the
sale. No other appliances or
chattel should be considered part of the real estate.
A dollar for dollar reduction to the mortgage amount for items not
considered part of the real
estate is required unless the item has no monetary value and left to
the buyer's discretion to
dispose of the property.
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