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Overview of California FHA Home Inspection Requirements
Home buyers tend to have a lot of questions about California FHA loan inspection requirements. It’s also a common source of confusion, particularly among first-time buyers.
The truth is that HUD doesn’t require a home inspection for California FHA loans. But they do require a property appraisal, which has some basic inspection requirements built into it.
Summary: This guide explains the home appraisal and inspection requirements for FHA loans, and how they might affect you when buying a home in California.
An FHA Loan Is a Government-Backed Mortgage
In this context, the term “FHA loan” refers to a mortgage loan that gets insured by the federal government, via the Federal Housing Administration.
In California and nationwide, FHA loans are the most popular type of government-backed mortgage. This program allows borrowers to purchase a home with as little as 3.5% down. It also has flexible qualification criteria.
Those are the two biggest benefits this program offers:
- You can make a down payment as low as 3.5%, with a credit score of 580 or higher.
- You could potentially qualify for an FHA loan even if you’ve had credit problems in the past.
But like all government-involved mortgage programs, the FHA program has specific rule, requirements, and procedures. And some of those relate to the home appraisal and inspection process.
Home Appraisal Required, Inspection Optional
As mentioned previously, all FHA-insured mortgage loans require a property appraisal. But a comprehensive home inspection is optional. It’s up to the buyer to decide whether or not they want a detailed inspection.
This can be a confusing subject for first-time buyers, so let’s break it down into two parts:
1. California FHA loans require an appraisal.
A home appraisal is a professional assessment of a property’s market value. An appraiser examines the property’s condition, size, location, and recent sales of similar homes to determine its fair market value.
The Department of Housing and Urban Development (HUD) requires a full property appraisal to be conducted for all FHA purchase loans in California.
The primary purpose of the appraisal is to determine the current market value and resale potential of the home. Mortgage companies and FHA insurers want to make sure that the home is worth the amount the borrower is paying for it.
The appraisal also has some basic property inspection components built in. The appraiser does not conduct a full home inspection like a regular inspector would. But he or she will evaluate the overall condition of the property.
Here are some of the minimum property requirements for FHA loans:
- The property must be free from hazards like exposed wiring, lead-based paint, or structural issues.
- Foundation, roof, and overall structure must be sound, with no significant damage or instability.
- The home must have functional utilities (electricity, gas, etc.) and safe water supply.
- Living spaces must include bedrooms, a kitchen, and a bathroom.
- Heating systems must safely and adequately heat the home.
- Electrical systems must meet code and be in good working order.
- Plumbing must function properly with adequate water pressure and no leaks.
- The property cannot be in areas with environmental hazards.
- The home must meet local building codes.
- Repairs may be required to address any deficiencies identified during the appraisal.
Let’s move on now to talk about the home inspection, as it relates to California FHA loans.
2. FHA loans do not have a home inspection requirement.
HUD does not require FHA borrowers to have a full and comprehensive home inspection. But they strongly encourage it. In fact, home buyers who use this program typically receive a HUD disclosure that stresses the importance of having the home inspected. But a full inspection is generally not required for California FHA loans.
Among other things, the FHA appraiser will check for encroachments. This is when one property has structures that intrude into the boundary lines of another property. Encroachment issues can be a problem.
During the California FHA appraisal / inspection, the appraiser will also observe the electrical system for proper function and safety. Again, it probably won’t be as in-depth as what a regular home inspector would do. But the appraiser will look for proper function and safety of all of electrical systems.
Similarly, the appraiser will evaluate the home’s plumbing system to make sure it works properly and that there are no obvious leaks.
If there is a permanently installed furnace for heating system, the FHA appraiser will review it for functionality.
California FHA Home Inspection Requirements
Federal Housing Administration (FHA) home loans are originated by mortgage lenders in the private sector and insured by the federal government. As a result of this government insurance, these loans must meet certain guidelines and requirements that are imposed by HUD.
Related: An overview of FHA requirements
Health and Safety of the Homeowner
When it comes to California FHA inspection requirements, HUD is primarily concerned with the health and safety of the occupant, and the resale potential of the property.
If there’s an issue with the home that could be a potential health hazard to the occupant, the FHA appraiser will likely flag it for correction. The same goes for issues that could affect resale value, such as serious damage to the foundation or roof.
Bottom line: If the house being purchased is structurally sound and presents no health hazards to the occupant, it will likely clear the appraisal process with no issues.
Where to learn more: If you would like to learn more about California FHA inspection and appraisal requirements, please refer to HUD Handbook 4000.1, which is available online.
Need an FHA loan? If you have questions about qualifying for an FHA home loan in California, please contact our staff. Our in-house experts can answer any questions you have about this mortgage program.
