The Federal Housing Administration requires a least one full home inspection before closing an FHA-backed loan. Appraisers inspect the property inside and out, analyze the site and check the heating, plumbing and electrical systems before referring any issues to a specialist inspector for detailed investigation. Appraisers follow the FHA mandated Minimum Property Standards, which is essentially a checklist for ensuring the safety and marketability of the home.
The FHA historically has taken a stringent approach to home appraisals, requiring the borrower to remedy comparatively minor defects before closing the loan. In December 2005, the FHA relaxed its standards. Appraisers must still report all deficiencies, including the purely cosmetic, but lenders now have professional leeway to determine whether the defect warrants a repair or a withholding of funds until certain work is carried out, known as an escrow retention. For the borrower, an "X" in the inspection check box no longer means certain refusal.
During the inspection, the FHA appraiser assesses your property's walls, floors, roof, foundations, access and egress points, electrical, heating and plumbing systems, drainage and sanitary facilities, among other things. Defects that pose a risk to health and safety or the structural integrity of the building automatically must be repaired and reinspected. This list includes but is not limited to defective structures such as a leaking roof, faulty mechanical systems, lead paint in pre-1978 houses and impaired exterior paint finishes in newer homes, and access safety issues, such as burglar bars that don't open from the inside or windows that won't stay open. Wet basements, leaking water heaters, the presence of hazardous or contaminated materials and settlement are all flagged for automatic repair.
Damage that is minor, cosmetic or brought about by general lack of maintenance is typically satisfactory as long as it presents no hazard to safety. Examples include missing tiles and handrails, cracked glass, leaky faucets, damaged but operable exit doors and surface treatments. If an item works well, your FHA inspector won't recommend it for replacement simply because of its age.
FHA appraisers won't specify an additional termite inspection unless your property shows signs of obvious infestation or termite inspections are required in your area, whether customarily or by the state. Similarly, in the absence of a local mandate or suspicion of failure or contamination, they won't call for an inspection of your septic tank or individual water system.
- Jupiterimages/liquidlibrary/Getty Images