Federal Housing Association loans (FHA) are excellent options for low-to-moderate-income buyers, but anytime you purchase a property through an FHA loan you must meet FHA appraisal. The purpose of the FHA appraisal is to determine the value of the home in question and whether or not it meets the General Acceptability Criteria from the U.S Department of Housing and Urban Development. You will only be able to obtain an FHA loan if you meet the appraisal criteria.
What does an FHA appraisal look for?
The FHA appraisal has two purposes. First, the appraisal is meant to assess the value of the property. Additionally, the appraisal must determine that the home meets the minimum property requirements. The appraisal requirements for the property include:
- The market value of the property is similar to the worth that the home guarantees.
- The physical condition of the property via a Valuation Conditions form. Any required repairs will be noted on this form.
- Free of odors, physical damage, hazards, etc.
- An analysis of the site details.
- The home must be viable.
The purpose of the appraisal is to look for anything that may affect the physical condition of the property, the health/safety of occupants, and the livability and marketability of the property. The appraiser will carefully inspect both the inside and outside of the home and complete the VC form. They will also photograph the property to note any improvements that impact the value of it.
Minimum Eligibility Requirements for an FHA-insured Loan
The checklist of appraisal requirements that the inspector will search for include:
- No lead-based paint.
- Free of health and safety hazards, such as blocked doors/steps or broken windows.
- Safe mechanical systems.
- Adequate and natural ventilation of crawl spaces and attics as well as sufficient access to crawl spaces.
- Roof in good condition, no leaks.
- No defective conditions such as poor construction, decay, leaks, etc.
- Available electricity.
- Proper water drainage from the perimeter of the walls.
- Free of soil contaminants.
- A functional septic system if there is one.
- A single real estate entity.
- No underground storage tanks.
- Sufficient water supply from an acceptable source.
- No termite infestation.
- Sanitary and safe sewage disposal.
- Clear, safe access for cars and pedestrians from the street.
- Safe mechanical systems that are functional and durable.
- Safe heating sources that meet all local requirements.
The FHA appraiser will note any defects on the VC form, and the lender will examine the appraisal to determine the eligibility of the property. The lender will also make sure that the space between buildings allows for exterior maintenance, every unit in the property is able to be maintained separately, each unit has its own sewer, electricity, gas, and water shutoffs, and you can access the property without going on another site.
Should the appraiser mark the site as needing “further repair” then you must fix those aspects before the property is eligible. In some cases, where there are extensive repairs required, the lender will reject the property. If you have more questions about FHA loans and the loan appraisal process, we are happy to help. Give our experienced team a call today HERE.
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