What Do FHA Appraisers Look for in a House?
According to the federal government, the Federal Housing Administration has insured 34 million homes since it's formation in 1934 through 2006. By insuring mortgage lenders against losses, FHA reduces the risk of lending out money, which makes it easier for homeowners to obtain a loan. Before insuring a mortgage, FHA requires that a house pass an inspection by an FHA-approved appraiser.
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Significance
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With conventional loans, lenders want buyers to make at least a 20 percent down payment; buyers who pay less face higher interest rates and will probably have to buy mortgage insurance. With FHA loans, buyers with good credit can put down as little as 3.5 percent, making a mortgage much more affordable. Even buyers with poor credit may be able to get by with a 10 percent down payment.
Qualifications
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To qualify for an FHA loan, you must be able to show a three-year history of steady income, the U.S. Department of Housing and Urban Development states. That includes not only earnings, but alimony, child support, veterans' benefits and Social Security. Your income must be large enough that your monthly debts -- child support, car loans and credit-card bills, for example -- added to your monthly house payment totals no more than 41 percent of your pretax monthly income.
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Geography
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An FHA appraiser, HUD states, will normally evaluate your home using your state or local government's building code, provided it's based on nationally-recognized code standards. If your community's code doesn't rise to that level, the HUD field office will decide which code to apply.
Function
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The purpose of an FHA inspection is to make sure a house is good collateral for a mortgage, which reduces the chance the lender will lose money and turn to FHA with a claim. Because of that, FHA inspections look at durability -- how long carpeting, cabinets, gutters and other features can be expected to last. Building codes don't have durability standards, so FHA has its own guidelines.
Features
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FHA inspectors don't worry about cosmetic problems, just problems that put the occupants at risk. For example, a leaky roof, foundation damage, exposed sub-flooring or inadequate entrance and exit ways from the bedrooms to the outside could bar you from getting an FHA loan, unless the owner makes repairs. Inspectors also check for site problems such as nearby gas lines, soil contamination or sinkholes.
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