Know Basic Standards for Government-backed Loans

2/14/2017

By: Justin Gensler
NMLS #611367
Vice President and Vice President, INB

Federal Housing Authority backed loans require our lending staff to ensure the property meets the organization’s standards. Local appraiser, Rikki Linne, with Linne & O’Brien Appraisal Group, LLC, says appraisers follow minimum property standards as outlined in HUD Handbook 4000.1.

Below are few of the guidelines Rikki frequently encounters in our market. She’s modified the language for our general, public use. As you read this, please note the appraiser is not a home inspector, and the purpose of the appraisal is to assist mortgage lenders like INB make the decision to provide mortgage financing.

1. The property should be free of any peeling, chipping, or scaling paint, regardless of the dwelling’s age or improvements.

2. Smoke and carbon monoxide detectors must be within 15′ of bedrooms/sleeping areas. The FHA has specific smoke detector placement requirements depending on the location of the detector.

3. The property must have sufficient attic access, along with proper and sufficient ventilation of the attic, and meet insulation requirements.

4. The water heater must have a pressure shut-off valve and be strapped and secured.

5. The appraiser must report moisture or water present in the crawl space and/or basement, and report any damage observed as a result of insects or pets.

6. All electrical outlets and switches must be in working condition and there must be a sufficient power supply (breaker box). The appraiser will report if the dwelling uses a fuse system.

7. All appliances included in the sale must turn on if they contribute to the value of the property.

8. The heating and cooling systems must test for normal operation.

9. The garage door must operate if an electric opener is present.

10. The home must have gutters and downspouts. The same applies to any ancillary buildings such as the garage.

11. The roof must have an “economic life” of at least two years. If two years or fewer, the appraiser must report the condition on the report. Linne & O’Brien Appraisal staff recommend a separate roof inspection.

12. The appraiser tests all water supplies, including toilets, for function and leaks.

13. All windows must work. This assures access from the home in the event of an emergency; proper latches provide security.

14. If there’s mold or mildew, the appraiser will report it and suggest having it remediated before the sale and encourage follow-up mitigation to prevent future occurrences.
Note from Linne & O’Brien Appraisal Group: This list has been modified for public consumption; however, the intended user of the appraisal report is the lender/client and FHA. The appraiser is to report to the client what is observed at the time of observation, in accordance with the 4000.1 HUD Handbook. It is the appraiser’s suggestion to the client for the repairs or inspections observed at the time of observation, but ultimately the decision of any repairs or required inspections are at the discretion of the underwriter.

Note from INB: INB does not endorse any specific appraiser.

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