What Are FHA Home Inspections?
What are FHA home inspections? Good question! FHA home inspections have a bit of a misleading name, so let’s start by debunking a common myth.
FHA inspections – or Federal Housing Administration inspections – are not traditional home inspections.
They are, however, precursors to traditional home inspections. Most notably, they’re key checkpoints that borrowers and lenders must clear together when financing a home with an FHA loan.
Is your head spinning a little? Don’t worry! Keep reading and let’s unpack the details of FHA home inspections and what they mean when you’re buying a home with an FHA loan.
FHA Home Inspections aka FHA Appraisals
FHA home inspections — technically also known as FHA appraisals — are ordered for homes purchased with FHA home loans. The goal of an FHA inspection is twofold:
- Determine an estimated opinion of property value.
- Ensure the property meets the FHA’s minimum property standards.
What is an FHA Home Loan?
FHA home loans are federally insured mortgages available to homebuyers who may not qualify for conventional loan financing. Borrowers who qualify for FHA loans may have lower down payments, lower credit scores, and lower closing costs. Homes bought with FHA loans must meet minimum property standards before the sale can move forward.
Learn more about FHA loans at these links:
What Happens During an FHA Inspection?
An FHA inspection is ordered by an FHA-approved lender before approval of a loan. Like traditional home inspections, FHA inspections run between $400 and $600. They’re generally paid for by the buyer and included in closing costs. An HUD- and FHA-approved appraiser performs the appraisal and property inspection in two parts.
Part One: The FHA Appraisal
First, the appraiser:
- Assesses the amenities and condition of the home
- Researches recent sales of comparable properties (“comps”)
- Analyzes neighborhood and local market insights to determine how they affect value
- Determines an estimated opinion of value for the property
Part Two: The FHA Inspection
Next, the appraiser inspects the home and ensures it meets the FHA’s minimum property standards of safety, soundness, and security. This includes evaluating the:
- Structural quality of the home
- Roof
- Plumbing
- Electrical
HVAC (Heating, Ventilation, and Air Conditioning) - Accessibility of the home
- Safety hazards such as mold, asbestos, radon, formaldehyde, and lead paint
Essentially, the FHA inspection confirms that a home is safe and livable — and that the home’s value justifies the FHA mortgage amount.
If the property passes the appraisal and inspection, the loan moves forward. If it doesn’t, the inspector notes the issues found in their appraisal/inspection report. Major issues must be fixed before the loan can be approved.
FHA Inspections Protect Buyers & Lenders
If you’re buying a home and using an FHA loan, the FHA appraisal and inspection process can feel a little worrisome. The process, however, protects your interests as a buyer. You want peace of mind that the home you want to buy is worth your investment and is a safe place to put down roots.
Likewise, FHA inspections protect lenders by ensuring they don’t issue loans for less-than-ideal properties. If a buyer unknowingly buys a home that needs costly repairs they can’t cover, the risk of mortgage default (and potential foreclosure) goes up.
FHA inspections protect both sides.
FHA Inspections Are Precursors to Traditional Home Inspections
Once a home passes the FHA appraisal and inspection, the next step is usually a more traditional home inspection. The HUD heavily encourages getting a separate home inspection (and we do, too!).
Why You Need a Separate Home Inspection
A home inspection is more thorough and detailed than an FHA inspection. While the FHA inspection is your first line of defense against a poor property investment, the home inspection is your ultimate security. It pinpoints issues to fix, gives you negotiating power, and protects your financial interests.
Plus, a detailed home inspection helps you understand the condition of a home and offers hints about issues that may arise in the future. It’s a must for anyone buying a home.
How to Find a Great Home Inspector
A trusted home inspector is your ally, so it’s important to partner with a good one. Find a great home inspector by:
- Getting Referrals From Your Contacts. Have a family member, friend, or colleague who used a great home inspector? Ask them for the details.
- Researching Certified Inspectors. Research local home inspectors who are certified members of two of the biggest home inspector trade organizations: ASHI (American Society of Home Inspectors) and InterNACHI® (International Association of Certified Home Inspectors).
- Checking Credentials. Make sure to choose a home inspector who has completed home inspection training, follows the Standards of Practice, and is licensed (if required in your state).
- Reading Reviews. Read reviews and testimonials as a final check before choosing your inspector.
A final tip? Choosing an AHIT-certified home inspector is always a good choice.
Learn More About Home Inspections (& Even Become One!) With AHIT
Speaking of AHIT-trained home inspectors, did you know you can become one? Learn more about the benefits of a career in home inspection and learn more about how to become a home inspector. Want to read more about home inspection topics? Visit our blog.
About the Author: Ashley Roe
