FHA Loan Articles
News, updates, and explanations to keep you informed.
Expiration Dates on FHA Appraisals
When it's time to get serious on an FHA insured mortgage and make an offer to buy a home, the property must be appraised by an FHA fee appraiser to establish the market value and make sure the home meets FHA standards. The loan can't be approved or closed upon before this appraisal happens.
When the property gets appraised and approved for sale, the FHA borrower, seller and lender can discuss a closing date. In most cases when the closing date is set and the agreements have been made, the end of the purchase process is in sight.
But FHA appraisals have an expiration date -- they don't remain valid indefinitely due to housing market changes and other variables. What happens if the closing date is set but the FHA appraisal expires beforehand?
FHA rules anticipate such situations--an appraisal may be extended for thirty days to allow the loan to close, "If a sales contract is signed or the borrower is approved for a loan prior to the appraisal expiration date" according to the FHA official site.
FHA loan approval becomes official "when the lender's Direct Endorsement underwriter signs the FHA Loan Underwriting and Transmittal Summary, Form HUD-92900-LT." According to the rules, once the approval is official, "The loan must close within 150 days (120 day validity period for original report plus 30 day extension), if the appraisal has not been updated with an Appraisal Update Report".
If an Appraisal Update Report has been submitted, the loan must close within 240 days.
The FHA only permits appraisal extensions once. They are also restricted in use--they can't be transferred or used by a lender not named in the original appraisal report, "unless the appraiser incorporates the original report by attachment rather than by reference per Advisory Opinion 3 of the USPAP."
When it comes to the sale of HUD owned homes, the rules change. FHA requirements state "a valid REO sales contract must be ratified within 120 days of the appraisal effective date, or the lender must order a new appraisal, or Appraisal Update Report (Mortgagee Letter 10-08). The 30 day extension is not allowed when the original appraisal is updated via an Appraisal Update Report."
FHA NEWS and RELATED ARTICLES
One type of question that sometimes arises about FHA loans-- Is there a no-credit-check version of an FHA mortgage loan? What is the criteria required for FHA loans that do not require a credit check and/or appraisal?
One not-so-common question about FHA loans still comes up often enough to discuss in detail. Some FHA loan applicants want to know if they can purchase a residence from another family member using an FHA insured mortgage.
Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if certain conditions are met.
Some FHA borrowers have questions about applying for an FHA loan after experiencing a short sale on a previous home. The FHA loan rules found in HUD 4155.1 have the answers for borrowers applying for an FHA mortgage after a short sale.
The FHA and HUD issued new rules for mortgage insurance designed to add fiscal security to the loan program, and when those rule changed the new guidelines were published in Mortgagee Letter 2013-04.