FHA loan rules require an appraisal of the property secured by the mortgage regardless of whether it’s an existing construction home or if you choose to build on your own land using a One-Time Close loan.
Do you know what the home loan rules say about any required repairs or corrections?
You may not expect an appraisal-directed repair from a new construction home.
But if the FHA appraiser finds something that does not meet local building code, or if there was some kind of damage uncovered during the appraisal (these are just two examples of what could happen at appraisal time on a new construction home) those issues must be corrected.
HUD 4000.1, the FHA Single-Family Home Loan Handbook, instructs the lender that in cases where the appraisal uncovers things that do not meet the FHA minimum property standard, “the Appraiser must report the repairs necessary to make the Property comply, provide an estimated cost to cure, provide descriptive photographs, and condition the appraisal for the required repairs. “
But that estimated cost to correct the problems must also meet FHA guidelines. They include, but are not limited to, requirements for the following:
“If compliance can only be effected by major repairs or alterations, the Appraiser must report all readily observable property deficiencies, as well as any adverse conditions discovered performing the research involved in completion of the appraisal, within the reporting form.”
Furthermore, “The Appraiser must limit required repairs to those repairs necessary to:
- maintain the safety, security and soundness of the Property;
- preserve the continued marketability of the Property; and
- protect the health and safety of the occupants.”
New construction homes are not 100% defect-free 100% of the time. Borrowers should not assume a new construction property is perfect, and it’s important to anticipate the need for additional compliance inspections or other expenses related to the appraisal when corrections are required.
You may not actually spend any money (if you have no requirement for a compliance inspection, for example, after all) but having those funds just in case can be a big help later on in the loan process.
Contact Us About One-Time Close Loan Opportunities
We have done extensive research on both the FHA One-Time Close Construction program as well as the VA (Department of Veterans Affairs) One-Time Close Construction program.
We spoke directly to the licensed lenders that originate from these residential loan types in most states. These are qualified mortgage loan officers who work for lenders that know the product well.
Each company has supplied us with the guidelines for their product. If you are interested in being contacted by one licensed lender in your area, please respond to the below questions to save time. All information is treated confidentially.
Your response to firstname.lastname@example.org authorizes FHA.com to share your personal information with a licensed mortgage lender licensed in your area to contact you.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allows for single-family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).
- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your credit score and/or the Co-borrower’s credit score, if known. 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either are eligible veterans, the down payment is $0 up to the maximum VA lending limit for your county. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.