December 2, 2021

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Is A Property Eligible for an FHA Mortgage Loan If It Has Asbestos?

Is A Property Eligible for an FHA Mortgage Loan If It Has Asbestos?
Is a property eligible for an FHA mortgage loan if it has asbestos?

Not everyone applying for an FHA mortgage loan is interested in buying a brand new home, and for those looking at older properties, the asbestos question is an important one to ask.

For example, some buildings insulated or otherwise constructed with asbestos products could pose a health hazard, especially if there are repairs, upgrades, or renovation work to be done.

FHA rules include minimum property requirements for safety, which address situations like these. Is a property eligible for an FHA loan if it has asbestos in it?

There’s no single answer to this question–there were many products which contained asbestos before the government banned its use in 1989 under an EPA rule. In the late 90s, a Circuit Court of Appeals partially modified this ban, which is why asbestos may still be found in some floor tile and other items.

A quick search of the FHA loan appraisal rules for the word “asbestos” turns up no results; HUD 4000.1 is silent on the subject asbestos specifically but does feature some guidance for the lender in terms of overall general health and safety requirements:

“The Mortgagee must confirm that the Property is free of all known environmental and safety hazards and adverse conditions that may affect the health and safety of the occupants, the Property’s ability to serve as collateral, and the structural soundness of the improvements.”

Federal, state, and local requirements will play a big role in determining whether or not a property that contains asbestos would be eligible for an FHA mortgage loan or not.

The FHA does not keep a record of all such applicable requirements; the local authority must be consulted to see what is required in that area, or how federal laws may apply.

Asbestos, like many other issues, would be examined on a case-by-case basis. The existence of building materials or insulation made from asbestos is addressed according to that specific instance, and how local, state, or federal requirements apply.

If asbestos is note during the appraisal and corrections are required, those recommendations would have to be followed prior to the loan being approved, and a compliance inspection may also be required.

Bruce Reichstein - FHA News Author

By Bruce Reichstein

September 15, 2020

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 where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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