Borrowers have plenty of questions about the FHA appraisal process. After all, if the appraisal doesn’t go well, it could mean the borrower has to decide whether to walk away and find something else or deal with the issues uncovered by the appraisal.
What is the real issue with FHA appraisals that confuses many borrowers? The fact that there are multiple standards that must be met and not just the ones that are set by the FHA and HUD. House hunters write us frequently to ask if a certain appraisal issue will affect their home loan.
And the simple answer is that there is no easy answer to appraisal questions because of one huge variable. And that variable is what state and local building code requirements say in addition to FHA loan rules.
That’s correct–FHA loan appraisal standards AND building code in your local area must be satisfied. Once upon a time the FHA and HUD had separate standards for different types of homes.
If you were looking for a condo unit, your appraisal issues may be unique to the condo under those old rules. The same could apply to mobile home loans, construction loans, etc.
There were over 250 standards, and that’s a great deal of information to maintain. Over the years, HUD has shifted its’ approach in this area–the codes weren’t always enough, and the FHA/HUD made alterations that could streamline the process.
From the HUD.gov official site:
“HUD requires that each property insured with an FHA mortgage meet one of the nationally recognized building codes or a State or local building code based on a nationally recognized building code.
In areas where such State or local codes are used, HUD determines if the State or local code is comparable to the model building code.”
“There are also areas of the United States that do not have building codes. If no State or local building code has been adopted, the appropriate HUD Field Office will specify a building code that is comparable to one of the nationally recognized model building codes.”
As you can see, appraisal issues can be complex depending on whether or not there is local law to deal with. Borrowers who want to know if a certain appraisal issue will affect their FHA home loan process, it’s important to ask the local code authority as well as learning what the FHA loan appraisal rules might say. Both answers will be crucial.