As the nation begins to recover from the recent mortgage and housing bust and we are seeing a loosening of lending practices, FHA loans are a popular choice for Ann Arbor home buyers because they typically require only:
- a 3% down payment
- a minimum FICO Score of 580
- a 10% down payment for new borrowers with less than 580 FICO score
But, qualifying for an FHA home loan is just the first step in the process. The second, and equally important step is the FHA appraisal. You’re wrong to think this is just the problem of the home seller. If the home does not pass this rigorous inspection, your loan will not be approved and you cannot buy the home of your dreams. There must be an FHA approved appraisal report before the FHA will even begin checking the loan requested by the buyer.
The minimal appraisal guidelines require that the property must be free of hazards that affect the health and safety of the property’s occupants. Here is a general list of guidelines to help both buyers and sellers.
- Heating & Cooling Systems. Must be in working order. Heating for cold areas and cooling for hot areas. An appraiser may require certification from a qualified contractor.
- Electrical. Must be available and checked for safety and that it meets code.
- Water & Sewage. Hot & cold, potable water must be available and connected to city or community systems. If well & septic, must conform to local requirements. There must be proper water pressure and flushing toilets.
- Termites. Property will be inspected for termite damage, but a termite inspection is not required if there is no evidence of infestation.
- Attics & Crawl Spaces. Must be properly ventilated and show no evidence of dampness or deterioration.
- Grading and Soil. Property must be properly graded to allow water to drain away from the house and soil must be free from contaminants.
- Lead Paint. If the home was constructed before 1978, the interior and exterior will be checked for defective, peeling, or chipped paint.
- Bedroom Egress. Must be able to exit to the exterior in case of fire. Window bars must meet fire safety codes.
- Smoke detectors must be installed and in working order.
- Repair requirements will be necessary for health and safety issues for broken windows, blocked doorways, steps without handrails.
For a more detailed list of FHA appraisal guidelines, view the entire handbook here. While FHA appraisals may be a bit more stringent that conventional, the main goal is to provide the home buyer with a hazard free new residence. If you’re considering making a move, visit our Ann Arbor Real Estate website where you can view local neighborhoods, search for homes, and see that latest market reports. And be sure to check out our Subdivision Hotline and Condo Hotline for up-to-date active and sold listing information for all of Washtenaw County!