February 13, 2018
What can affect an FHA appraisal or an FHA-required inspection? There are many factors that might influence the outcome of these procedures.
For example, borrowers who are having a home custom-built using an FHA One-Time Close construction loan will learn about appraisal requirements that include noting the proximity of the project to gas stations, power lines, and other safety-related issues.
The rules that instruct the lender and appraiser in these areas can be found in the FHA loan handbook, HUD 4000.1. Airport hazards, slush pits, and operating oil wells are just some areas the appraiser will note where applicable.
For projects classified as New Construction under FHA loan rules, the appraiser must note the general environmental conditions of the area of the construction project and adjacent areas. According to HUD 4000.1, “The Mortgagee must require corrective work to mitigate any condition that arises during construction that may affect the health and safety of the occupants, the Property’s ability to serve as collateral, or the structural soundness of the improvements.”
When it comes operating oil wells or operating gas wells, the FHA loan handbook says, “If a proposed or newly constructed dwelling is located within 75 feet of an operating oil or gas well, the Mortgagee must reject the Property unless mitigation measures are completed.”
The rules in this portion of the FHA loan rulebook are silent on what those mitigation procedures might be; that may depend greatly on what’s required by state law where the home is located.
For “slush pits”, the FHA loan rules tell the appraiser, “If a Property is Proposed Construction near an active or abandoned Slush Pit, the Appraiser must require a survey to locate the pit. The Mortgagee is to assess any impact on the subject Property.”
Special airport hazards also potentially affect a borrower’s construction loan. “If a proposed or newly constructed Property is located within Runway Clear Zones (also known as Runway Protection Zones) at civil airports or within Clear Zones at military airfields, the Mortgagee must reject the Property for insurance.”
Furthermore, the rules say that a proposed or newly constructed home “located in Accident Potential Zone I at military airfields may be eligible for FHA mortgage insurance provided that the Mortgagee determines that the Property complies with Department of Defense guidelines.”
Speak with a loan officer to learn more about how these issues may or may not affect your FHA home loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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