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
This is some great info George....Thanks!
Justin, thank you for saying that, I hope that it is useful to you.
I agree with Justin, this is great info. Thanks George for putting it out there.
This is important information George. I'm sending it out to agents in my network.
Thanks. Lenn
This is good to know. I have a lot of FHA deals out there now.
Hi George -- Good information here. I have bookmarked it for future buyers I may run across that may use FHA.
This is very timely for me. I just wrote on a foreclosure that looks pretty good, but I did have some concerns, but now I don't. Thanks.
Hi George - Came across your post. Very good info which will go a long way to remove the negative or apprehensive perception some agents feel towards doing a FHA deal. As you stated, the guidelines are not deal breakers but actually make the deal stronger.
Cheers
George,
There are so many people with unfounded fear of FHA. I think it is a great program for buyers and sellers. A win-win situation...
Ann Hayden in sunny Wildwood, Missouri
I am working with FHA buyers right now. The program is providing more and more opportunities for buyers who need extra assistance.
It's so true that many buyers, sellers and realtors are not aware of these changes. It's sometimes the same with VA loans. Sellers balk because they "don't want to pay all those fees or do all those repairs that are required". Thanks for putting this info in front of us as a reminder that FHA is a GOOD thing.. not a problem to be overcome.
FHA for so many years was had to navigate. When the changes occurred it was still hard to change the mindset of the public but I think they're starting to come around.
George.. Hooray! I'm glad to see that some of the small (who really cares about) issues will NOT be a problem any longer. Thanks for sharing. Let's get the word out to the buyers.
Good stuff George - you have been consistently keeping us up to date on relevant topics concerning the market. Thank you.
Diane Rice
George - The timing was never more perfect for this post. Given the number of properties that may require that little bit of "TLC" having this information is a must not only for buyers but for the many realtors out there who were not aware of these FHA changes. I'll be reblogging this one! :)
George, we all loose touch with changes, when we have so many lenders with different policies. I deal with a lot of portfolio lenders on my projects, and haven't kept touch with the FHA changes thanks to the outline.
Great info to keep us up to date...thanks
Thanks for posting this George. I sent it to my agents + reblogged it!
Excellent info George. We all thank you. Not to muddy the waters, but we do need to be aware that, just because FHA changed their rules doesn't necessarily mean the corresponding lenders have. We recently had to move two FHA loans away from Wells Fargo because of some procedural rules they have overlaid to the FHA rules. So we have to know what the investor is going to require as well as FHA. With Wells the first was a pest inspection on the entire exterior of a condomium building (and clearance) which held 8 units; the second was on how they would receive tax information on a borrower who had filed for an extension and had not yet submitted his prior years taxes. FHA would allow for him to file them and submit a stamped receipt but Wells wouldn't accept that. But we are making alot of progress in getting FHA back into the mainstream and it is a wonderful product for the moderate income home buyer. Thanks again for a great post.
Good info and much appreciated. I am going to assume that this is across the board, state to state. If not let me know PLEASE! I am bookmarking for reference.
There is an free online class that covers a number of types of mortgages including FLA and VA for the latest information http://www.themtgmentor.com
Thanks for the reminder. If we can't do FHA then we are going to have a much lower income. I am signed up for an FHA loan class for continuing education. This is my 20th year in real estate but we need to refresh ourselves constantly.
Very good information. In my area of Southern California we haven't used FHA loans until recently. Now we have many buyers who are using FHA loans. I didn't have experience with the old system of appraisals and the requirements for fixing the repairs but I'm sure glad that isn't the case any more.
I was not aware that FHA had different guidelines for appraisals. Always learning.... and thanks.
I was unaware of these changes and appreciate your letting us know about them.
Jen, thank you for saying that.
Lenn, I don't know what to say. I am honored that you found this worthy to share with your network.
Chuck hope it is helpful.
Chis, I hope you run across a lot of them:)
Brien, that was what I was hoping to accomplish with this.
Fredy, I totally agree.
Ann, a win win is a great way to put it.
Sabrina, right now it is the go to program around here also.
Mary Ann, VA is even more misunderstood, and we need to change that.
Mary, I agree some of the resistance has gone away.
Valerie, I am trying, I am trying :)
Diane, I will try to keep on doing that.
Donna, I hope it removes some of the fears, because FHA is a great program.
Steve, even when FHA is not one of our main programs, we don't know when we will have to use it, so it is good to have something to refer to.
Mike & Cindy I will try.
Erica I hope they find it useful
Beth, some Lenders/Investors like Wells are adding there own condition to the lending guidelines, but I have not run into that with the appraisal process. Thanks for the heads up.
Bridget, yes it is across the board.
Norma, thanks for the link.
Joe, I have gone through the FHA three day class twice now and I have learned something each time.
Thanks for the post George..as a new realtor, these aren't changes for me but great knowledge to have. I'm just trying to learn as much as I can everyday and posts like yours are great..thanks again
Vicki, the new FHA higher loan limits should help in some areas out there, hopefully Realtors will take advantage of that.
Ronnie, you made my day, if I was able to make you aware of this.
Barbara, wow now you really made my day with both you and Ronnie saying that.
Brian there is a lot of good knowledge to be had here in the Rain if you look for it. Glad I could contribute to that for you.
It is amazing that some agents and sellers still don't know that FHA has loosened up on appraisals.
George, thank you for the information, it will be a of gret help.
Russ, we always have new Realtors entering the business and it is expected that they would not know, but as you can see there are many existing Realtors that are not aware of them, because they may not have had the need for FHA until recently.
John glad I could assist.
FHA is a big player in the market today. I remember during the seller's market seeing listings which stated "NO FHA NO VA". Things certainly change quickly. Another plus of FHA is that their appraisers do not make notations re: "declining market". It is a wonderful option and I recommend FHA to buyers on a routine basis.
Joan, I saw a "No VA" just the other day because it was a Foreclosure and the Realtor thought that VA would not allow the bank to transfer title for 90 days. VA does not have that rule, and after a long conversation he accepted the VA offer.
Thanks for the update,,,,as far as the FHA requirement for the fifty feet between the well and septic,,,I thank the state health dept of arkansas requires 100 feet,,,,
I didn't realize the windows were no longer a problem. We had an FHA loan last year that required us to repair the window.
It is so refreshing to hear you say this! I have been frustrated time and time again with Realtors that don't realize this change has been around for several years now. Thank you for reminding us and reiterating the facts! The majority of the loans I have done since 2007 have been FHA. Keep up the good work!
George -
Absolutely, a step in the right direction!
Please, keep us posted as you hear about further changes.
Appreciate the share!
DEAN & DEAN'S TEAM CHICAGO
George: I recall my first FHA Sale after the changes went into effect... I was a little nervous... Of course I was happy with the results. Would be repairs under the old system were not called and things proceeded as planned and another sucessful closing.
George another great post packed with timely information. Those changes certainly made FHA loans more attractive.
Thanks for the updates on these important changes, George. I knew about some of this but having the details is a big help. I think it's a significant improvement and will make things easier to move through the process for many homes.
Jeff
Given the need for FHA loans now is greater than ever, this is a tremendous remonder that it isn't the nightmare people sometimes expect.
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
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.
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.
Thanks,
Kathy
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.
Great info as always George. I printed it our for some FHA buyers I have....
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.
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.
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.
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.......
Tim, sorry no I have not.
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.
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.
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.
George, Thanks for getting back to me with answer. I appreciate it!
Barb you are very welcome.
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.
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 :) :)
Hmmm I think I'll go with....still do the tests and get all repairs done
Sally ............ hummmmm but now that is your choice :) :)
Thanks for this blog, this was very insightful and helpful.