FHA Mortgage Guidelines:  For the Professional

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FHA Appraisals

Appraisers: 

Appraisers must be on FHA’s approved list on the FHA Connection (this verifies the Appraiser is currently licensed and in good standing with both the state and with HUD.) A copy of the appraiser’s license is not required in the loan file, as the Lender may not obtain an FHA Case # if the appraiser is not currently on the HUD approval list.

The assigned appraiser must perform the inspection of the property.  He/she may not simply sign the appraisal performed by another appraiser

Appraisal requirements:

Appraisal must be done on 1004 and include the complete FHA case number.   It must also include the estimated remaining economic life.

All VC sheets, 3 photos (front, rear and street view of subject house) are required, a room sketch of interior, a location map of subject and all comps is required. For manufactured homes, the appraiser is also required to provide the additional 1004C Addendum report and must identify the model type by the ID# on the tag.

Appraisers must identify all sales activity on the subject and the comps for the prior 3 years. For purchase transactions, the underwriter must carefully review if the subject property was purchased by the seller less than 1-year prior to the borrower’s application for the mortgage. 

If the Seller has not owned the subject property for over a year, the underwriter must obtain information on the price the seller paid for the property and the exact date the seller purchased property.  Any increase in price within the first year after the seller bought the property must be carefully analyzed and appropriate steps must be taken to justify a value/price increase. 

Cost of renovation and improvement may be required from the seller and a second (FHA) appraisal may also be required. The FHA underwriter is to follow the PA Bulletin 03-044 that outlines the steps to be followed for property being “flipped”. Note: Any costs involved to validate price increase may not be charged to the borrower.

Any interested 3rd party contributions/concessions must be addressed on the appraisal and appropriate adjustments must be made. A copy of the sales contract must be provided to the appraiser.

Many lenders will only accept appraisals from their own "approved list".  So if you are a processor, loan officer, or real estate agent make sure you don't inadvertently order one before you know the lenders preference.

 

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