There is NO REASON to prefer a high LTV (over 80%) conventional purchase over an FHA purchase. FHA is far more flexible than Fannie Mae and PMI companies when it comes to credit, debt ratios, and gifts for down payments. The fear of FHA is that the appraisal is “riskier”, but that is a myth. FHA purchases can also be “as is”, but many “old school” realtors have an FHA-stigma in their minds b/c FHA used to (but not anymore) require clear pest reports.
FHA appraisers are usually the same people who do conventional appraisals. They do them on the same forms, and employ the same guidelines. The ONLY difference is that FHA appraisals require a specific checklist of minor items (see list below). All of these items can usually be repaired in a day or so (if they are even called out). And, if they are significant enough to be called out, they will usually be called out by conventional appraisers too.
“Health and Safety” issues and major structural flaws (like a significantly raised/dangerous sidewalk, or a rickety stairway) can be called out by any appraiser (FHA or Conventional).
Finally, it is true that FHA appraisals “stick with the property” for up to six months, but that is ONLY an issue if one FHA buyer backs out after the appraisal is done, and another FHA buyer steps in. FHA appraisals are not “public record”.
EXTRA CHECKS REQUIRED FOR AN FHA APPRAISAL
· Identify any chipping, peeling or cracked lead-based paint – interior and exterior
· Verify there are no issues with water damage or drainage
· Ensure proper ingress and egress (18″) from all buildings to the lot line.
· Test for a properly working and strapped heater
· Test for working heat-source
· Test for adequate water pressure and no water leaks
· Validate every bedroom has exterior access
· Test for a working oven hood/fan (carbon monoxide danger)
· Verify a minimum 60 amp electric box
· Test for working electric outlets in every room
· Ensure major appliances/garage door opener work
· Identify any exposed wiring or missing electric box cover plates
· Verify roof vents are screened and there is a maximum of three layers of roofing material
· Complete a head and shoulder inspection of attic and crawl space
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