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Article Update: What Are The FHA Loan Requirements For Wells and Septic Systems?

July 25, 2022

FHA Home Loan

In 2017, we published an article that asked an important question: what are the FHA requirements for sewer/septic systems? 

As we discussed back then, there are important issues to consider if the property you want to buy with an FHA mortgage can’t be hooked up to a local utility.

Our 2017 article asked an important question: what are the FHA requirements for sewer/septic systems? For example, the placement of the septic tank; back then, we reported FHA loan rules required the tank to be at least 50 feet from any well on the property.

In 2022, those rules have not changed. And wells must be a proscribed distance from other features of the property including:

  • Property line: 10 feet
  • Septic tank: 50 feet
  • Drain field: 100 feet
  • Septic tank drain field may be reduced to 75 feet if allowed by the local authority

What happens if a property can’t meet these conditions? FHA loan rules in HUD 4000.1 require the home to meet FHA appraisal requirements and local code before the FHA loan can be approved. Where wells and septic tanks are concerned, the approval of local health authorities still makes all the difference.

Some properties have features that can’t be altered. For example, if a well is the only water source available, the home must be appraised using the well as the water source as opposed to the appraiser recommending a connection to the local utility. 

It is true that FHA loan rules require, as we reported back in 2017, connecting to the utility company “whenever feasible.” That is still true today, but in cases where it is not feasible, the well and/or septic system must meet appraisal standards (such as those listed above) AND those of the local health authority in order for it to pass the FHA appraisal process.

We reported back in 2017 that FHA rules in HUD 4000.1 establish a requirement for any community sewage systems to be properly licensed. They also must be “adequate to service the property.” 

This will depend on the approval of the local authority; the FHA does not maintain a specific list of “approved” septic systems and well water standards.

But FHA loan rules in 2022 still require these systems to meet certain standards. Does it sound like a broken record every time we write “it depends on the local authority”?

That is because we get this question more often than you might think. Many people want to know what the FHA standards for septic or wells are, expecting or hoping the FHA can provide local data for whatever municipalities they are in. The FHA does not do this.

On top of that, some FHA standards are more technical rather than health-related. From HUD 4000.1:

“If the Property has a septic system, the Appraiser must examine it for any signs of failure or surface evidence of malfunction. If there are readily observable deficiencies, the Appraiser must require repair or further inspection.” 

HUD 4000.1 also requires the lender to get, where required, a local Health Authority report on the well or septic system. That is on top of the requirement that any system failure requires an inspection by the local health authority or a licensed professional sanitarian.

Sewer systems are not identical, but as long as the system meets local health authority standards and FHA appraisal guidelines, it may still qualify for an FHA mortgage. Such issues are typically handled on a case-by-case basis.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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