FHA Loans and Pest Control Issues

If you are buying a home with an FHA mortgage, you’ll want to learn how the Federal Housing Administration (FHA) addresses termite and other wood-destroying pest issues that might be associated with the new property.

How much do you know about termites and other wood-destroying pests? You could save time and money by knowing key details ahead of time.

True or False: Standard FHA-required hazard insurance policies automatically include coverage for damage caused by termite infestations.

Answer: False

Typical hazard insurance policies, including those meeting basic FHA requirements, generally do not cover damage from termites or other wood-destroying insects. Such damage is often considered a maintenance issue rather than a sudden, accidental peril covered by standard hazard insurance. The FHA's primary concern with pests is ensuring the property is free from active infestation and related damage when the loan is made.

True or False: The FHA mandates a pest inspection for every property seeking an FHA-insured loan, regardless of location or condition.

Answer: False

According to HUD guidelines, a pest inspection (specifically for wood-destroying insects) is not automatically required for all existing properties. It becomes an FHA requirement if the appraiser notes evidence of a possible active infestation, if such inspections are customary in that particular geographic area, if state or local laws mandate it, or if the lender, at their discretion, requires one.

True or False: If an FHA appraiser observes signs of potential termite activity during their property assessment, no further action regarding pests is typically needed for the loan to proceed.

Answer: False

If an FHA appraiser notes any evidence of active wood-destroying insect infestation or significant damage, a further inspection by a qualified pest control company is generally required. The FHA's goal is to ensure the property meets its minimum standards for health, safety, and structural integrity before insuring the loan.

True or False: If a mandatory pest inspection reveals an active termite infestation in a home being purchased with an FHA loan, the FHA will still insure the loan as long as the buyer agrees to treat the issue after closing.

Answer: False

If an active infestation of wood-destroying insects or significant damage is confirmed, FHA guidelines typically require that the condition be professionally treated and any related damage repaired before the loan can be closed and insured. The property must be certified as free of active infestation.

True or False: For newly constructed homes in areas known for high termite risk, the FHA may require the builder to guarantee that preventative measures against termites were taken.

Answer: True

In geographic areas prone to termite infestation, HUD guidelines often require builders of new homes to provide documentation, such as Form HUD-NPMA-99-A (Subterranean Termite Protection Builder's Guarantee), certifying that the property was appropriately treated for subterranean termites or constructed with termite-resistant materials according to specific standards. This provides a one-year guarantee from the builder.

True or False: An FHA borrower can ignore a lender's requirement for a pest inspection if they believe the property is in excellent condition.

Answer: False

Lenders have the discretion to require a pest inspection for an FHA loan, even if not automatically triggered by other FHA criteria. If the lender requires it as a loan condition, the borrower must comply for the loan process to continue.

True or False: The FHA requires borrowers to maintain a separate, ongoing "termite insurance" or "pest insurance" policy throughout their FHA loan, similar to flood insurance in high-risk areas.

Answer: False

While the FHA is concerned with the property being free of pest damage and infestation at the time of loan origination, it does not typically require borrowers to maintain a specific, ongoing insurance policy that exclusively covers future termite or pest damage. Standard hazard insurance usually excludes this, and the FHA focuses on the property's condition at closing and the borrower's ongoing maintenance.