March 22, 2019
FHA home loans are offered for a variety of home needs including building a house from the ground up with an FHA One-Time Close construction loan, but there is also an option to use your FHA mortgage to buy an older home that is not considered new construction.
In cases where the property is older than 1978, there are some additional rules regarding the potential for lead paint in the residence that all borrowers thinking about buying older property should be aware of.
FHA home loan rules in HUD 4000.1 point out that any home built prior to 1978 must include disclosures to the buyer:
“…the seller must disclose any information known about lead-based paint and lead-based paint hazards before selling the house, in accordance with the HUD-EPA Lead Disclosure Rule (24 CFR 35, subpart A, and the identical 40 CFR 745, subpart F). For such Properties, the Mortgagee must ensure that…the Borrower has been provided the EPA-approved information pamphlet on identifying and controlling lead-based paint hazards.”
That pamphlet is titled, “Protect Your Family From Lead In Your Home”.
The seller is also required to insure the Borrower is provided “a 10-Day period before becoming obligated to purchase the home to conduct a lead-based paint inspection or risk assessment to determine the presence of lead-based paint or lead-based paint hazards, or waived the opportunity”.
FHA home loan rules also require the sales contract for the property to contain an attachment “in the language of the contract” which must be signed and dated by the seller and buyer.
The “language” requirement basically means you must have specific lead paint disclosures and agreements in that attachment in the same language (English, Spanish, or any other language used as applicable) as the rest of the contract.
Having lead paint in the home may not be an automatic deal-breaker depending on circumstances, but the buyer must be fully informed as to the nature of the lead hazard if known.
Ask your loan officer how this FHA policy may affect your mortgage loan transaction. Depending on state law, FHA guidelines, and the nature of your transaction there may be other requirements that must be met.
The existence of lead paint from an appraisal standpoint may be more complicated if there are state laws that require lead paint abatement-you will need to see what laws in your state may apply in such cases.
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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