December 29, 2015
When it’s time for the FHA appraisal to happen, a borrower may be understandably nervous about the outcome of the appraisal. What happens if the appraiser finds areas that must be corrected or repaired?
In many cases those corrections or repairs are directed as a condition of loan approval. In some instances (which would be handled on a case-by-case basis) the repairs may also require a compliance inspection which the borrower would have to pay for.
When repairs or corrections are required, can the borrower request that the cost of making those repairs be added to the home loan?
According to HUD 4000.1, “A Mortgagee may add repair costs to the sales price before calculating the mortgage amount if:
–the repairs are required by the Appraiser to meet HUDs Minimum Property Requirements;
–the repairs are paid for by the Borrower; and
–the sales contract or addendum identifies the Borrower as the party responsible for payment and completion of the repairs.”
Furthermore, FHA loan rules establish a procedure for calculating these expenses and adding them to the loan amount where appropriate:
“The maximum amount of repair costs that may be added to the sales price is the lesser of:
–the amount by which the value of the Property exceeds the sales price;
–the Appraisers estimate of repairs; or
–the amount of the contractors bid.”
Adding these expenses to your home loan amount can change the amount of your monthly mortgage payments in some cases, depending on the expense involved. It is always best to have a conversation with your lender about such increases to the loan amount to see how they might affect your payments.
The same thing is true of FHA Energy Efficient Mortgage loan increases–if you use this add-on to your FHA home loan or refinance loan the amount of your mortgage payment will be affected. It’s always best to do the math either at home or with your lender to see how your payments could change and whether that’s an increase you’re willing to accept.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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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