December 20, 2017
What FHA appraisal issues should I know about? That’s a question that likely doesn’t get asked enough, but the answers can help you make a more informed choice when buying a home.
FHA Appraisal Rules For The Living Unit
The FHA loan handbook spells out several basic requirements for the living unit which include (but may not be limited to) the following guidelines-the lender is required to insure each home has the following:
-a continuing and sufficient supply of safe and potable water under adequate pressure and of appropriate quality for all household uses;
-sanitary facilities and a safe method of sewage disposal. Every living unit must have at least one bathroom, which must include, at a minimum, a water closet, lavatory, and a bathtub or shower;
-adequate space for healthful and comfortable living conditions;
-heating adequate for healthful and comfortable living conditions;
-domestic hot water; and
-electricity adequate for lighting, cooking and for mechanical equipment used in the living unit.
FHA Requirements For The Structural Condition Of The Home
The lender must insure that, “the Structure of the Property will be serviceable for the life of the Mortgage. The Mortgagee must confirm that all foundations will be serviceable for the life of the Mortgage and adequate to withstand all normal loads imposed.”
These requirements do not address specific building code issues which may apply depending on local laws, state requirements, etc. FHA loan rules defer to state/local building code and any such requirements must also be met above and beyond the FHA guidelines.
FHA Appraisal Rules For Remaining Economic Life Of The Home
The “remaining economic life” rules found in HUD 4000.1 protect both the borrower and the lender. The borrower should be aware of these requirements and the reason behind them-the home should be viable for the entire duration of the loan, minus typical wear-and-tear and typical maintenance requirements. According to HUD 4000.1:
“The Mortgagee must confirm that the term of the Mortgage is less than or equal to the remaining economic life of the Property. If the Property is located in an older, declining urban area and the remaining economic life produces an unreasonably short mortgage term by reason of its location, the Property may be acceptable under Section 223(e), provided:
-the area is reasonably able to support adequate housing and living conditions for families of lower income levels;
-the location features adversely affecting the desirability and usefulness of the Property do not endanger the health and safety of its occupants;
-the Property is marketable to the typical occupant of the area;
-the physical life of the Property is greater than or equal to the term of the Mortgage; and
-the Mortgage represents an overall acceptable risk as determined by the Jurisdictional HOC.”
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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