FHA Appraisals

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

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.



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


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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & a #FL Licensed Lender who can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

Comments (65)

The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

George - This is a great summary of those FHA changes.  FHA has become king in our first time homebuyer market.  Have a settlement today (represent the seller) where the buyer is doing a FHA loan.  Has happened so many times in the last 6 to 9 months I have become very comfortable with the process.  ~  Chris

Mar 25, 2009 11:47 PM
Barb Szabo, CRS
RE/MAX Above & Beyond - Cleveland, OH
E-pro Realtor, Cleveland Ohio Homes

George. Excellent update on fha mortgages. I have an fha related question for you. Does the 90 day rule still apply for investors when they are selling their rehabbed homes, that they cannot sell it with an fha loan from the buyer within that 90 day period? I have a first time buyer in love with a house whose 90 days will not be "up" until 4/16 so it seems I can't sell her the house until then. My understanding is that the contract may not even be written within the 90 days. Thanks for you help.

Mar 26, 2009 12:06 AM
Kathy Carson
Blanks Properties - Lynchburg, VA
Realtor, Lynchburg, VA, VA Homes - Lynchunberg,Bedford, Campbell

George - Thanks for the info - I have printed it off and it is now in my file.  I have several great Lenders that I recommend and trust with years of experience but they are not with me on a day to day basis when I'm showing a house so this will serve me as a great tool.



Mar 26, 2009 12:08 AM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Hi George I knew about most of these changes but I know there are plenty that don't or even knew that FHA was more strict to begin with. Nice job on this.

Mar 26, 2009 12:25 AM
Dave Jones
Dave Jones Realty, llc. - Prospect, CT
Broker/Owner - e-PRO Dave Jones Realty llc Prospec

Great info as always George.  I printed it our for some FHA buyers I have....

Mar 26, 2009 02:15 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Christine, they should have only required that if the glass was broken, because that can cause other damage, but cracks are no longer a repair.

Beth, I find myself have to tell this to the Realtors around here all the time, so I figured I should post something about it.

Dean you are welcome and I will try to post about future updates.

Rolland that is what we like to hear :)

Jennifer, I know that changes helped me a lot as well.

Mar 26, 2009 06:49 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jeff, with the prices being what they are around you, you probably don't get to use FHA a lot, but when you can it is a great loan.

L. Philip, your right these changes made a big difference.

Christopher & Stephanie, I work with a lot of first time buyers as well, and FHA is one of the main loan products that I use.

Barb I know that they waived that rule on that until June because of all the bank foreclosures, but I am not sure if it extends beyond the foreclosures.  I will check, but you are right about the dates on the contract, it is 90 days as of that day, and not approval or closing.

Kathy I am glad that you will be able to use this as a tool.

Mar 26, 2009 06:58 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Bill, so you need to help me spread the word my friend .......... LOL

Dave if you or they have any questions you know how to reach me.  I am always available.

Mar 26, 2009 07:02 AM
Tim Monciref - Austin, TX
Over 2,000 homes sold…..

Thanks.  Have you done a post on national evaluation services?  They are clobbering our local appraisal values to death.  The last was a tad over 13% below the appraisers evaluation. I have no clue if we have a deal until the week before closing......if not two days before closing.  Pretty scary and a tough sell.......

Mar 26, 2009 09:22 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Tim, sorry no I have not.

Mar 26, 2009 10:09 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Barb, I double checked with my Closing Department, and the waiver of the 90 days is only for foreclosures, investors still will not be able to do anything FHA for 90 day.  And even after the 90 they will need to document the improvements that they have made.

Mar 26, 2009 10:12 AM
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

George, yes they have loosend up and I do believe it is a good thing as some were simply ridiculous. In Mi we are seeing appraisers in some situations ( not FHA) still act like inspectors. But, we just deal with it. Thanks good information.

Mar 26, 2009 01:23 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Missy, it will probably get worst with those Appraisers that behave like that after the new appraisal regulation go into effect on May 1st. for conventional appraisals.

Mar 26, 2009 01:45 PM
Barb Szabo, CRS
RE/MAX Above & Beyond - Cleveland, OH
E-pro Realtor, Cleveland Ohio Homes

George, Thanks for getting back to me with answer. I appreciate it!

Mar 26, 2009 02:01 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Barb you are very welcome.

Mar 26, 2009 02:39 PM
Dena Stevens Coriz
Rocky Mountain Realty - Canon City, CO
Putting The Real Into Realtor Since 2004

Getting this info in Colorado is like pulling teeth. Guessing from the comments above I'm thinking getting info like this around the country is tough.

Mar 26, 2009 03:54 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Dena, a good Loan Officer should be aware of all this, and be keeping that Realtors they work with up to date.  But if you don't have one near you, you can always ask me :) :)

Mar 27, 2009 12:52 AM
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI

Hmmm I think I'll go with....still do the tests and get all repairs done

Mar 27, 2009 05:10 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Sally ............ hummmmm but now that is your choice :) :)

Mar 27, 2009 08:43 AM
Mark R. Hardy
Short Sales, REO, New Builds, First Time Buyer - Mesa, AZ
Short Sale Specialist Realtor - Mesa AZ

Thanks for this blog, this was very insightful and helpful.

Jan 03, 2012 06:04 AM