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What are the FHA requirements for wells and septic systems? FHA loan rules have some things to say about the placement of a septic tank, for example. FHA loan rules in HUD 4000.1 require the tank to be at least 50 feet from any well on the property.

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FHA Rules for Wells and Septic Systems

August 1, 2022

FHA Rules for Wells and Septic Systems
There are many different types of homes and locations to purchase homes with an FHA  mortgage. Some want to use an FHA mortgage to buy a condo unit in the city, others want to use an FHA loan to buy a manufactured home in more rural or isolated areas. In situations where a house hunter wants to buy a home that is too far away to be connected to local utilities, some house hunters raise an important question.

What are the FHA requirements for wells and septic systems? FHA loan rules have some things to say about the placement of a septic tank, for example. FHA loan rules in HUD 4000.1 require the tank to be at least 50 feet from any well on the property.

The rules for placement include requirements that wells are kept a minimum distance from other aspects of the property including:
 
  • Property line: 10 feet
  • Septic tank: 50 feet
  • Drain field: 75-100 feet
HUD 4000.1 requires a home to meet FHA appraisal requirements and local code, otherwise, the FHA loan cannot be approved. That local code requirement also includes the need for a septic system and/or well water to meet local health authority requirements.

FHA loan rules require the property to be connected to the local utility whenever feasible. But it’s not always feasible, hence the need for the lender to rely on the local health authority’s standards.

When reading the rules in this area, you’ll note there are no guidelines for water purity or other technical issues. FHA guidance is limited to less technical requirements including one that the well/septic system is large enough to serve the whole property.

There are some “mechanical” issues that may apply here, according to HUD 4000.1:

“If the Property has a septic system, the Appraiser must examine it for any signs of failure or surface evidence of malfunction. If there are readily observable deficiencies, the Appraiser must require repair or further inspection.” 

HUD 4000.1 also requires the lender to get, where required, a local Health Authority report on the septic system. That means it’s up to the local authority to review the facts and make a determination. They deliver that information to the lender, who will decide based on the contents of the report.

If the well and/or septic system meets the “mechanical” requirements in HUD 4000.1 and passes the local health authority’s review, the presence of a well and septic system aren’t a deal-breaker for an FHA loan. It’s just that these features may require a bit of extra attention in the appraisal process depending on circumstances.

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