April 18, 2021

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FHA Loan Reader Question: Septic Systems

A reader asks, “I am looking to buy a home in the middle of a suburban neighborhood that is the only house in the area (that we know of) that is on septic. Everyone else is on city sewer.”

“Now if the FHA comes out with an appraiser to inspect the home/property, will they require that the home be hooked up to city? Or will they inspect the septic systems to make sure it’s in proper working condition? And will it pass if it is? And will they allow it to stay on septic?”

Questions like this have a two-part answer. Part one is that local building codes and ordinances have much to do with the FHA appraiser’s decision. The home must live up to local code in order to pass the appraisal without recommendations for repair or outright rejection (depending on the severity of the violations). Borrowers who have appraisal questions should look up the local building codes or call the FHA directly for more advice.

In general, FHA rules don’t take issue with septic systems as long as the system functions properly and, again, meets local standards. For example, this Valuation Protocol from the FHA advises FHA assigned appraisers,

Joe Wallace - Staff Writer

By Joe Wallace

April 11, 2012

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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