November 21, 2019

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FHA Loan Appraisals and Home Inspections

045A reader asks, “Just bought a home and while in crawl space installing drain tile I realized the main sewer line was leaking. The house was unoccupied for 2 years prior to purchase. I have an FHA loan and cannot afford to have contaminated soil removed and line repaired. I realize that I made a mistake buying this home but I felt protected from major issues in getting an FHA loan. What can I do?”

The most important question in this situation is whether the borrower paid for a home inspection prior to purchase. It can be tempting for borrowers to rely on the appraisal alone to catch problems or issues with a house, but it’s never a good idea to do so. Why?

FHA loan rules are clear–the FHA appraisal is not intended as a stamp of approval on a home or a guarantee that the property is defect-free. a borrower should, regardless of the type of home loan on a new purchase property, always pay for a home inspection. Consider what the FHA official site says about appraisals versus inspections:

“FHA does not guarantee the value or condition of your potential new home. If you find problems with your new home after closing, we can not give or lend you money for repairs, and we can not buy the home back.

That’s why it’s so important for you, the buyer, to get an independent home inspection. Ask a qualified home inspector to inspect your potential new home and give you the information you need to make a wise decision.

As part of our job insuring the loan, we require that the lender conduct an FHA appraisal. An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers. The lender does an appraisal for

• to estimate the value of a house
• to make sure that the house meets FHA minimum property
• to make sure that the house is marketable

Appraisals are not home inspections.”

That information is found in the FHA/HUD PDF file titled, “For Your Protection, Get A Home Inspection”.

If a borrower HAS paid for a home inspection and a defective condition still appears, you may need to seek legal counsel in order to determine who might be liable and how.

Do you have questions about FHA home loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

March 17, 2015

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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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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