A reader asks, “I’m looking to purchase a home though a loan from FHA. The home is old but only occupied by a single family, very nice condition in and out, but has old 100 amp wiring and has a old heating system. No problems with either. Will this affect the process of the purchase?”
Questions like these are common, and before we answer it’s important to point out that the FHA itself does not lend money. It guarantees the home loan which is issued by a private lender. We only mention this because some reader questions are worded in such a way that it seems there may be a mistaken impression that FHA actually offers the loan money–it does not.
With respect to this reader question, FHA loan rules for minimum property standards are not the only ones that must be observed when it comes to these issues. If a property does not meet state or local building code, it may require corrections and/or repairs as a condition of FHA loan approval. Borrowers should know that the age of a property does not in and of itself make it disqualified for an FHA mortgage loan. But if that property is unsafe, has structural issues or problems with the age of its wiring, heating, or plumbing systems, those issues will be addressed when it’s time for the appraisal.
The appraiser will recommend fixes or corrections based on what he or she has observed; appraisers are not experts in electrical engineering, HVAC systems, or plumbing–if an issue is not readily observable during the appraisal process it may be missed. That is one reason why borrowers are urged to pay for a professional home inspection before committing to a purchase or as a condition of purchase–the home inspection is a more complete top-to-bottom review. A borrower should never assume the property is “fine” just because it passed an FHA appraisal, especially when it comes to older properties which may technically meet state, local, and FHA standards.
There are many questions borrowers should have for older properties; for example–how much life does the roof have left in it? Do you know how long before you will need to pay to have it replaced? What is the state of the plumbing system and other areas that can be affected by age? A home inspection is a key part of making an informed purchase.
Borrowers should know that FHA does not keep state and local building codes on file–it’s up to the borrower to discuss compliance issues with a local authority when it comes to issues above and beyond FHA minimum property requirements. You can learn more about the FHA standards by calling them at 1-800 CALL FHA.
Do you need more information about FHA home loans? Ask us in the comments section.