FHA Loan Inspection Requirements
Having a home inspection done when you purchase new property is one of the best ways to secure peace of mind. The home buying process can be nerve-wracking at the best of times. Still, you can take some of the uncertainty and risk out of making such a major investment by having a qualified professional assess the condition of all of the major systems in your home.
While having a home inspection done by a certified home inspector is non-mandatory, it’s not uncommon for lenders and insurers to require an appraisal be done in order to lend you money for your home or ensure a future purchase. That’s the biggest difference between a general home inspection and an FHA inspection — a home inspection is not required, and the report results go directly to you and the seller. In contrast, an FHA inspection report goes to the FHA as well.
What is an FHA inspection?
The Federal Housing Administration (FHA), Is a government division that falls under the purview of the Department of Urban Housing and Development. The purpose of an FHA loan is to replace a conventional mortgage that you would get through a major lender, like a bank. The requirements of an FHA loan in terms of credit rating and down payment can be less stringent than those of a bank. This means that, especially for first-time homebuyers who don’t have credit or equity built up from past purchases. FHA loans make up about 19% of all new home sales.
Does FHA require inspection?
The FHA requires a home appraisal done by a certified FHA appraiser to approve you for a loan. This is because the FHA needs to verify that they are approving you for a loan to purchase a home that is in good condition and isn’t going to end up costing you tons of money to repair. If you’re putting all of your money towards fixing major systems in your house, like your foundation, roof, or electrical, it makes it much less likely that you will be able to pay back your loan on time. Essentially, the FHA is trying to ensure that you’re set up as best you can be to be a successful homeowner.
FHA inspection checklist
The FHA inspection checklist is very similar to a routine home inspection, but it does cover some extra elements that a home inspection does not. Below are the major components that an FHA appraiser will look for. Don’t worry if some of these things come up — it doesn’t mean your potential new home will fail. Your inspector can give your home a conditional pass, meaning that you’re all good as long as the issues they find are fixed before the purchase is completed.
- The property must be free of anything that risks the health and safety of you and your family or negatively impacts your potential home’s structural integrity.
- If you’re not on municipal water and have a septic system, it must be functional. Septic repairs are notoriously expensive!
- Your potential property can’t have any hazardous soil contaminants.
- The drainage system must be functional, directing water away from the perimeter walls and foundation.
- There must be an adequate and sufficient water supply.
- There can’t be any evidence of termite infestation.
- Your property must have safe road access for both vehicles and pedestrians.
- There must be natural and adequate ventilation of attics and crawl spaces.
- Your foundation must be in good condition.
- The property must have sufficient access to the crawl space to complete the inspection.
- The roof must be in good condition and prevent moisture from entering the home. If a new roof is needed, the FHA requires specific guidelines to be followed.
- The mechanical systems must be safe, protected from destructive elements, functional, and of acceptable quality.
- Heat sources must be safe, functional and meet any local bylaws or requirements.
- Electricity must be available for lighting and any equipment the appraiser might need to use.
- Your inspector will consider other health and safety hazards. For example, broken windows, blocked doors, or stairs without a handrail.
- There can’t be any lead-based paint in your potential new home.
What won’t pass an FHA inspection?
Certain things would cause your home to fail an FHA appraisal. What this means is that there’s something that would require such a major repair that the FHA will decline your loan. These issues need to be a significant fault with one of your home’s essential systems – here are some examples of what would likely cause an FHA appraiser to fail a home:
- Damage to the foundation that has caused major cracks, resulting in significant structural compromise to the home.
- Evidence of a major flood resulting in mold, mildew, or even rotting within the home.
- Evidence of fire, electrical or otherwise, that has caused significant damage.
Homes are complicated, and many issues may be classified as significant enough to fail an FHA inspection. However, the above are some of the most important examples.
What if my home doesn’t pass the FHA inspection?
If your FSA appraiser finds that your home fails inspection, you have a few options.
- You can simply walk away and continue your home search.
- You can make up the difference to cover the cost of repairs out of your own funds.
- You can see if the seller is willing to drop the home’s price to cover the repair cost.
The home appraisal process can be a bit nerve-wracking since the fate of your home loan approval rests on it passing the FHA inspection. Try not to worry too much, though. You do have options even if the issues discovered are major.
Standard home and FHA inspections are very similar in terms of what the inspector or appraiser is looking for. The components of your home are the same: foundation, structure, roof, electrical, and HVAC. Inspectors and appraisers aren’t looking to nitpick for reasons just to fail a home — they are professionals looking out for your future peace of mind. What it comes down to is that they are verifying the quality, condition, and safety of the major elements of your home so that you can rest easy that your investment is a good one.