FHA Appraisal Rules for Basements
May 7, 2022
You may not be on the hook for those corrections, but if you are trying to negotiate with a seller in a competitive market and you really want that house, negotiating who pays for the appraisal correction might be something to consider.
With that in mind, what are the FHA appraisal rules for a home that comes with a basement or crawlspace? The FHA appraisal process includes specific standards in this area which must be met. In cases where there are corrections required as a condition of loan approval, those corrections must be made and inspected--it’s not done on an honor system.
The basic rules in this area begin with the general condition of the foundation--it must be adequate to properly support the home.
HUD 4000.1 contains rules for the lender and appraiser. It states, “The Mortgagee must confirm that all foundations will be serviceable for the life of the Mortgage and adequate to withstand all normal loads imposed.” And what happens if this is not true?
The FHA list of “defective conditions” for basements, crawlspaces, and the foundation includes:
“…evidence of possible structural failure (e.g., settlement or bulging foundation wall, unsupported floor joists, cracked masonry walls or foundation)”
Such conditions would be noted by the appraiser--corrections are recommended where feasible but such corrections are not always possible. If the problems cannot be corrected, the home cannot qualify for an FHA mortgage.
The foundation and the basement should be “serviceable” over the entire duration of the loan term or must be repaired or modified to make that possible.
According to HUD 4000.1, “The Appraiser must perform a visual observation of the foundation and Structure of the improvements and report those results.” In cases where the FHA appraiser detects a structural issue, HUD 4000.1 says the Appraiser must “address the nature of the deficiency in the appraisal where physical deficiencies or adverse conditions” are reported and which may demand an inspection.
Basement issues may include things not directly related to the structural soundness of the foundation. For example, sump pump systems must be suitable to properly service the home and must be in good repair. If the appraiser notes the sump pump system does not meet these basic requirements, corrections are likely to be required in the appraisal report.
Any evidence of excessive moisture in a basement or crawlspace is an area of concern for the appraisal. If you note standing water, trickling water, or very damp basement walls when you do your initial walkthrough of any property, you can expect the appraiser to note the same problems.
------------------------------
RELATED VIDEOS:
Here's the Scoop on Conventional Loans
When Do You Need a Cosigner?
Analyzing Your Debt Ratio
FHA Loan Articles
February 17, 2025The federal government backs FHA home loans, which allows participating FHA lenders to offer lower down payment options and more lenient credit requirements. How much do you really know about your FHA home loan options and how they compare to other mortgage choices?
February 13, 2025For many college graduates, student loan debt is a concern. A common question is how this debt impacts the ability to buy a home. This Q&A explores the relationship between student loans and FHA loan approvals. How much do you know about how your student loan debt affects your ability to be approved for a mortgage?
February 12, 2025Choosing between FHA and conventional home loans can be daunting for some first-time home buyers. What are the concerns between these two programs, and what does each one offer the borrower? We examine some of the key issues in our question-and-answer session about FHA mortgages versus conventional loans.
February 11, 2025Established in 1934 as part of the National Housing Act, the FHA's primary mission is to stimulate the housing market by providing mortgage insurance to lenders. This insurance reduces the risk associated with lending to borrowers who may otherwise be considered higher risk, encouraging lenders to offer more favorable terms, such as lower down payments and more flexible credit requirements. A key element of the FHA program is its commitment to fair housing, which is deeply rooted in the Fair Housing Act.
February 10, 2025How much do you really know about the home buying process? One major factor in protecting your new investment is knowing how the title search process works and why you need to have one done. This quiz will assess your comprehension of what a title search entails, why it's so important when using an FHA loan, and how it protects you as a buyer. From identifying potential liens to guaranteeing clear ownership, a title search plays a critical role.
