On many occasions I am called to do inspections for people obtaining FHA loans or other government backed loans while purchasing their homes, many times for first time home buyers. I thought I could discuss a little about what they are, and what impact it may have on the inspection.
First, what is an FHA Loan? An FHA Loan is a loan that is insured by the Federal Housing Administration. The benefit to this type of loan is that it allows a smaller down payment allowing certain individuals the ability to obtain financing when they otherwise might not. There are many restrictions and criteria that needs to be adhered to with this type of financing. A good guide can be found here: loans.usnews.com/fha-loans
How does this effect the inspection?
FHA inspections are conducted by an FHA approved appraiser for safety and general condition. Property Condition requirements can be found here: FHA Guidelines. Mainly the lender wants to see that safety guidelines are adhered to. For example, handrails, guardrails, and stair rails is a big one, I wrote about them in this post. Another is the general condition of the exterior, if there is any peeling paint or rotten surfaces, that may become an issue. Proper egress from sleeping areas is also a big one. Electrical receptacle safety is also a defect that comes up in many of these homes. It may become necessary to make repairs prior to closing. This can sometimes be negotiated with the homeowner, but sometimes this must be paid for by the buyer to make the transaction go through.
In summary…
The FHA loan program is very beneficial to certain individuals but there are extra hurdles to overcome. Generally electrical issues as well as handrail safety is in need of upgrade in these cases. I have known of some loans that were held up due to the exterior condition of the home as well. It is good to get the required criteria from your lender at the start of the process so you are not surprised after the home inspection and appraisal!
-AZ
Aaron M. Zuehlke is the owner and inspector at Zuehlke Inspection Service, LLC, a full-service home inspection company serving Southern Wisconsin. Specializing in Home inspection, Radon Testing, Mold Testing/inspection and Residential Thermal Imaging. He can be reached by email at Aaron@Zuehlkeinspections.com or by calling the office at 608-931-7485.