For Buyers

It has been a little over three years since FHA made changes to their appraisal process. It is hard to believe that it has been that long, but it is even harder to believe how many people in this Industry are still not aware of those changes.

In January of 2006 FHA finally listened, and made major change to their appraisal requirements, these changes removed many of the obstacles that use to have us all running around trying to correct in the past. With these changes FHA moved significantly closer to being on par with conventional appraisals.

When these changes were made in 2006, we contacted several of our FHA approved Appraisers and met with them all together, at our office, to try to get a better understanding of how they were going to apply these new standards. As a result of that meeting our Vice President of Marketing at McCue Mortgage, Gary Kulik, put together a great piece for us to pass out to the Realtors that we call on and do business with

I blogged about this back when I first joined ActiveRain, but without going into this much detail, in fact it was my fifth blog back on September 28, 2006. I decided to bring these changes to everyone’s attention again, because of what I state before, there are still many in the business that don’t know about this. As much of an effort as we, and others made back then to get the word out, I still run into Realtors on a regular bases that are still unaware of these changes. As a result they are still concerned about Loans that require an FHA Appraisal, and are reluctant about accepting offers from Buyer that will be utilizing a FHA Loan to purchase the property. In these days when Fannie Mae and Freddie Mac have tightened up their guidelines considerably, to the point that it is much easier to qualify for a FHA Loan then it is for a Conforming (Conventional) Loan. Couple that with the recent increase in FHA Loan Limits, which have significantly increased the number of houses that FHA Loans can be done on, it is more important than ever before to make sure that everyone in the Industry is aware of the changes, and remove the fears.

It is important to also point out that these same changes also apply to Connecticut Housing Finance Authority (CHFA) Loans, since they are insured through FHA

The changes to the FHA Appraisal removed many of the repair requirements, and there are very few repair requirements needed any more

Examples of MINOR property conditions that no longer require AUTOMATIC repair for existing properties are:

• Missing handrails, unless it creates a safety problem.
  
• Cracked or damaged exit doors.
• Cracked window glass.
• Minor plumbing leaks (such as leaky faucets).
• Defective floor finish or covering (badly soiled carpeting).
• Rotten or worn out counter tops.
• Crawl Space with debris or trash.
• Minor exterior paint peeling of paint in homes constructed Post 197

Examples of tests that may no longer be REQUIRED:

• Wood Destroying Infestation Report-required if there is no evidence of READILY OBSERVABLE ACTIVE infestation.
• Well (Individual Water Test)-Required if there is no knowledge that well water may be near sources of contamination.
• Septic Test-required if there is no known evidence of system failure.

It is still advisable for Buyers to still do these tests for their own peace of mind, and some of this may be covered or detected by a Home Inspector, but the Buyer now has the option to not do them unless there is knowledge of problems in these areas.

The conditions that still remain and that we have to be aware of and address are those that maybe a risk to health and safety of those occupying the house, or soundness of the property. Example of this are:

• Inadequate access/egress from bedrooms to exterior of home.
• Major peeling of exterior paint on house constructed before 1978.
• Leaking or worn out roofs, (if there are 3 or more layers of shingles) all existing shingles must be removed before re-roofing.
• Evidence of structural problems (such as damage caused by excessive settlement).
• Well and Septic that are less than 50 feet from one another.

I hope that a few that are still not aware of these changes read this blog and become more comfortable with FHA Appraisals. This seems to be a great way to get the word out to a large number of Realtors, than I call on.

To this day I still carry the fact sheet around with me that we developed back when these changes first came out, so that when I run into a Realtor that is not aware of them, I can provide them one. But I hope that those out there that are not aware of these changes will stumble across this blog and that it helps to relieve their fears and concerns.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com