FHA Loan Appraisal Questions and Answers
Remember, FHA home loans require appraisals but do not require home inspections. That said, no home buyer should buy a house without paying for the optional appraisal-do so at your own risk, as neither the lender nor the FHA can help you if you purchase a home without an inspection and find defects later on.
What Is the Appraisal Designed to Do?
The FHA appraisal process is a tool for the lender to determine the fair market value of the property and to make sure it meets MINIMUM standards for FHA loans, as well as state/local building code.
The lender will take the appraised value and compare it to the asking price of the home. If the asking price is lower, the basic loan amount will be for that amount. The lower number of the two (asking price and appraised value) is the standard.
Does the Appraisal Detect All Problems With the Home?
Absolutely not. It is not designed to do so, nor does the appraisal act as a stamp of approval for the house you have appraised.
Is The Appraisal Process Closed Once The Property Has Been Reviewed By The Appraiser?
No. The appraiser may find problems with the house. In many cases those problems may be corrected, and the appraiser will note those corrections which must be accomplished as a condition of loan approval. In such cases, another look at the house is required. This is called a compliance inspection and yes, the borrower is required to pay for this inspection as part of the costs of the loan.
Are There Cases Where an FHA Appraisal Resulted in the Denial Of The Loan?
Some properties are not suitable for FHA loans, and in the appraisal process you will find that houses too close to gas pipelines, homes located in certain noise zones near airports, or houses that are located in certain flood hazard areas may not be approved for FHA mortgage loans.
Lender standards in this area may also apply-your lender may not be willing to issue a loan for homes near mining operations, gas stations, or other locations. This may be associated with the appraisal process, but you will need to ask your lender what is typical in that housing market for approved or denied properties.
Ask a lender if you aren’t sure how any of these issues may apply to your specific home loan transaction. And remember that appraisal requirements are vastly different in terms of procedure and/or timing for fixer-upper loans and houses being repaired or built from scratch. There will still be an appraisal required, but the timing of that appraisal will depend greatly on the nature of the home and the home loan.
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