March 17, 2015
In our last blog post we addressed a reader question about FHA appraisals and why appraisals are not considered home inspections. This is a very important issue and deserves some extra attention here for one important reason: an FHA appraisal is never a substitute for a home inspection.
Borrowers may be tempted to save a few hundred dollars and skip having the voluntary (as in, not required as a condition of the loan) home inspection performed, but doing so is a very bad idea.
An FHA appraisal is, as the FHA official site points out, for the lender and addresses the lender’s needs only. A home inspection, which is not required by the lender as a condition of the loan, is for the borrower and is designed to look out for the borrower’s interests, not the seller or the lender.
An FHA appraisal cannot and does not address all areas or issues potentially related to the purchase of your new home. The appraiser is not required to walk on the roof and may or may not physically enter the crawlspace, etc. If the appraiser does not walk onto the roof, but the borrower trusts the appraiser’s estimation of the home, how is the borrower protected?
The answer is, the borrower is not protected unless he or she hires a professional home inspector to walk out onto the roof to inspect it.
Let’s examine what the FHA official site has to say about appraisals versus home inspections.
“Appraisals and Home Inspections areDifferent
As part of our job insuring the loan, we require that the lender conduct an FHA appraisal. An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers. The lender does an appraisal for three reasons:
• to estimate the value of a house
• to make sure that the house meets FHA minimum property standards
• to make sure that the house is marketable
Appraisals are not home inspections.
Be an Informed Buyer
It is your responsibility to be an informed buyer. Be sure that what you buy is satisfactory in every respect. You have the right to carefully examine your potential new home with a qualified home inspector. You may arrange to do so before signing your contract, or may do so after signing the contract as long as your contract states that the sale of the home depends on the inspection.”
It is very important to be an informed buyer regardless of whether you purchase with an FHA loan or not. Paying the money for a home inspection could potentially save you thousands of dollars later on.
Do you have questions about FHA home loans? Ask us in the comments section. All questions/comments are held for review before appearing on the website. Your question may not appear right away until we’ve had a chance to review it.
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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