From time to time we handle reader questions asking about defects in homes discovered after purchase. When applying for an FHA home loan, an FHA appraisal is a requirement for loan approval, but a home inspection is an option the borrower is free to use (or not). But this “option” is an investment no borrower should skip, as FHA appraisals are not a guarantee that a property is free from defects or problems.
One of the most common questions we get asked in this area is, “What can be done about (defective condition X) discovered in my home after my loan closed?” Our answer always involves asking whether the borrower paid for the home inspection or simply relied on the FHA appraisal to indicate that the home was potentially “approved” to purchase.
But the FHA official site makes it quite clear that the appraisal process is not a stamp of approval on a property. Nor is it a guarantee that the home is free of defects.
Some borrowers may take issue with the idea of paying “twice” for a look at a property to be purchased with an FHA mortgage loan, but the FHA appraisal is really quite different than a home inspection. A home inspection, carried out by a trained professional, is a much closer examination of the home and its component parts.
An FHA appraisal is basically what the name implies-a general appraisal of the home to make sure it meets minimum standards.
According to the FHA/HUD publication, “For Your Protection, Get A Home Inspection” we learn the FHA’s stance on the FHA appraisal process. “FHA does not guarantee the value or condition of your future home, and FHA does not perform home inspections. If you find problems with your new home after closing, FHA cannot give or lend you money for repairs, nor can it buy the home back from you.”
We discuss this issue from time to time because so many questions come in every year indicating that borrowers sometimes choose not to pay for the optional, but critically important home inspection. It is true that a home inspection can be expensive, but it’s a case of paying hundreds of up front to save potential thousands of dollars later.
Borrowers should never purchase a home without paying for the home inspection. Relying on the FHA appraisal alone is not only against the advice of the FHA itself, but also offers no recourse should a defect be found in the property once it has been purchased and the deal closed.
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