FHA has been and still is a mortgage choice for home borrower's and is often a preferred source of funding for lenders. Lenders reduce their risk of loss by issuing loans according to FHA guidelines as FHA loans are insured against default by the borrower.
Recently, new lending guidelines have changed the manner in which appraisals are being handled and now lenders are using third party vendors to assign appraisers versus ordering the appraisal direct with the appraiser as previously done in the past. The theory for this new method is to reduce the influence of the lender and/or other parties on the appraisal and home valuation process.
While the intentions of the new method is good, the reality of its implications are varied. Appraisers are now conditioning the properties more for clarification and further certification where items of disrepair, deferred maintenance or structural questions are noted as part of the appraisal inspection.
Often times buyers have home inspections done as part of the transaction. Sometimes the buyer has accepted the home inspector's view and assessment of the property, only to discover that the appraiser may have a differing point of view as to the condition of the home or the need of a repairs. The lender will have an underwriter review the appraisal and in most cases if the appraiser is concerned or notes an issue on the appraisal report, the underwriter will require it to be resolved as part of the loan approval - even when a home inspector has a less concern for the same issue. In the world of mortgage lending, the underwriter is the "KING" of this process.
Buyers and realtors alike need to be aware of these new challenges and how to effectively navigate resolving issues as they arise. Here are a few tips on how to deal with appraisal conditions on FHA participating loan programs:
#1 - Obtain clear and written direction from the underwriter identifying the problem and how they desire the problem to be addressed.
#2 - Address the problem in the manner suggested by the underwriter. Be thorough and provide a complete and full remedy complying with the undewriter's request on every point.
#3 - Undewriters are not negotiators. Too often an underwriter will review a borrower's request to "avoid" the remedy requested as "manipulating" the loan process and raise unneccessary concern. Get complete information and complete the information in the manner they desire - no more and no less.
#4 - Use qualified, licensed contractors to do repairs. Contractors need full resumes with references. Contractors will also need to complete the necessary lender's forms, provide proof of licensure, and evidence of appropriate liability insurances.
#5 - Employ patience and be thorough! Engage everyone in the process.
#6 - Allow yourself 45 - 60 days to close on your contract to purchase in case an appraisal issue would arise (especially in cases where the property has deferred maintenance or repair concerns).
#7 - Foreclosure properties or properties needing repairs may not be good for the traditional FHA program but may be best suited by the 203 K FHA Rehab loan program. Please refer to "My Links" for more information on 203 K FHA loans.
Recently, new lending guidelines have changed the manner in which appraisals are being handled and now lenders are using third party vendors to assign appraisers versus ordering the appraisal direct with the appraiser as previously done in the past. The theory for this new method is to reduce the influence of the lender and/or other parties on the appraisal and home valuation process.
While the intentions of the new method is good, the reality of its implications are varied. Appraisers are now conditioning the properties more for clarification and further certification where items of disrepair, deferred maintenance or structural questions are noted as part of the appraisal inspection.
Often times buyers have home inspections done as part of the transaction. Sometimes the buyer has accepted the home inspector's view and assessment of the property, only to discover that the appraiser may have a differing point of view as to the condition of the home or the need of a repairs. The lender will have an underwriter review the appraisal and in most cases if the appraiser is concerned or notes an issue on the appraisal report, the underwriter will require it to be resolved as part of the loan approval - even when a home inspector has a less concern for the same issue. In the world of mortgage lending, the underwriter is the "KING" of this process.
Buyers and realtors alike need to be aware of these new challenges and how to effectively navigate resolving issues as they arise. Here are a few tips on how to deal with appraisal conditions on FHA participating loan programs:
#1 - Obtain clear and written direction from the underwriter identifying the problem and how they desire the problem to be addressed.
#2 - Address the problem in the manner suggested by the underwriter. Be thorough and provide a complete and full remedy complying with the undewriter's request on every point.
#3 - Undewriters are not negotiators. Too often an underwriter will review a borrower's request to "avoid" the remedy requested as "manipulating" the loan process and raise unneccessary concern. Get complete information and complete the information in the manner they desire - no more and no less.
#4 - Use qualified, licensed contractors to do repairs. Contractors need full resumes with references. Contractors will also need to complete the necessary lender's forms, provide proof of licensure, and evidence of appropriate liability insurances.
#5 - Employ patience and be thorough! Engage everyone in the process.
#6 - Allow yourself 45 - 60 days to close on your contract to purchase in case an appraisal issue would arise (especially in cases where the property has deferred maintenance or repair concerns).
#7 - Foreclosure properties or properties needing repairs may not be good for the traditional FHA program but may be best suited by the 203 K FHA Rehab loan program. Please refer to "My Links" for more information on 203 K FHA loans.
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Customary & Reasonable Fees in Appraisal Services