Most loan officers, well at least a good number of them, hate Federal Housing Administration loans simply because of their appraisal guidelines. A good majority of loan officers are those that feel these guidelines are hard to meet, but the truth of the matter is they are not. The FHA guidelines are only in place to ensure the home safe and sound, and there are no safety hazards that could risk the lives of residents. Some basic things the guidelines look at include:
⎯ Size of windows, especially bedroom windows
⎯ General Condition of the roof and its materials
⎯ Indication of environmental hazards
⎯ Electrical and heating
⎯ Any lead-based paint
Keep in mind that these are only a few of the many things that the FHA appraiser looks at during the appraisal process. Here are the mandatory things that the FHA appraiser must request repair on:
- Broken doors and windows
- Structural complications like a sinking structure foundation or such like damage to the foundation
- Roofs with over 3 layers of gravel or leaking roofs
- Poor drainage system such as damaged or blocked gutters and all else that contributes to water stagnation within the house and its surroundings
As is evidence from this list, it all boils down to the safety and unassailability of the property to ensure the lender is giving out money for a safe and secure home. Lenders want to minimize the odds of getting the property back after financing due to major deficiencies such as those mentioned above. This doesn’t however mean that the list is exhaustive because appraising can be region specific; you shouldn’t be surprised if the FHA appraiser requests for additional repairs.
Note that the appraiser is not the lender but a third party whose main job is to determine the real value of the property so that it can qualify for FHA mortgage insurance. In most cases, the appraiser will use a home that is within a one mile radius to appraise a given property. The value obtained is then used to figure the total amount of FHA insurable mortgage loan.
The role of FHA is to insure the mortgage from the lender and because they are the ones offering insurance for the mortgage, they want to ensure the home is safe and sound.
This is a win-win situation for both the lender and buyer because the lender is assured that if anything goes wrong they will get their cash back and the buyer is sure that the property is safe and sound for human occupancy.