What Time Magazine Says About FHA Mortgages
April 14, 2024
When a first-time homebuyer starts researching their options for a mortgage loan, it’s easy to find bad information and half-true information online, even from otherwise trusted sources. Some publications do their due diligence and review FHA loan rules' “chapter and verse” to ensure accuracy.
Others aren’t so diligent, and a first-time house hunter may make assumptions based on inaccurate FHA home loan details reporting that don’t serve them well later.
The purpose of this article isn’t so much to call out these publications as to remind the borrower to ALWAYS speak to a participating FHA lender about questions and concerns over a home loan in addition to any online research, as it’s easy to pick up inaccurate or outdated information.
What Time Magazine Says About FHA Mortgages
In an article titled, FHA Loan Requirements 2024, Time Magazine published the following about FHA mortgages:
“FHA mortgages don't require an inspection, but they do require an appraisal. An FHA-approved appraiser will visit the property and do a thorough check of the home. The goal is to make sure the home passes the FHA's minimum property standards...”
Is the appraisal really a “thorough check of the home?” HUD.gov published a document called For Your Protection Get A Home Inspection, which includes this:
“An appraisal is different from a home inspection and does not replace a home inspection. Appraisals estimate the value of the property for lenders. An appraisal is required to ensure the property is marketable. Home inspections evaluate the condition of the home for buyers.”
Time’s wording here may lead some to believe the appraisal is a complete “inspection” of the property and that the results will do the same thing. The two processes are totally separate and don’t provide the same data for consumers.
Appraisal vs. Inspection
Time’s assertion that the appraisal process is “thorough” does not take into account the FHA appraisal guidelines, which allow “exterior only” appraisals, which were used widely during the COVID-19 pandemic. Time Magazine isn’t deliberately misleading here, but there are missing facts. The appraisal is not a tool for the consumer.
The home inspection is the tool for the borrower, not the FHA appraisal. A home inspection is a thorough review of the home a buyer needs, and no buyer should rely on the appraisal alone.
That said, FHA appraisals can be more detailed than conventional ones.
FHA Mortgage Insurance
Time reports that, regarding FHA mortgage insurance, “FHA loans do require mortgage insurance, which is usually for the entire duration of the loan.” Which is technically true.
However, Time fails to mention here that mortgage insurance on FHA loans is required for either the full loan term or for 11 years if you make a down payment of 10% and meet FHA requirements. Mortgage insurance cancellation is not automatic.
FHA Condo Loans
Time reports. “In 2023 FHA loans can only be used on single-family homes with a four-unit cap. Buying a condo is permitted, as long as it's an FHA-approved condo.”
This is not true--the FHA modified its condo loan requirements in 2019, according to HUD.gov:
“On August 15, 2019, FHA published its Condominium Project Approval Final Rule,” which the agency says is a “single unit approval” policy that became effective for FHA loans issued for condo purchases in projects NOT on the FHA approved list.
“To be eligible for Single-Unit Approval, the unit must be located in a project that is not FHA-approved, that is complete and ready for occupancy, has at least five dwelling units, and it is not a manufactured home. The project must also meet a subset of the requirements set forth for project approval, including FHA insurance concentration, owner-occupancy percentage, and financial condition of the project.”
If you are looking to buy a condo unit with an FHA loan and the condo project is missing from the FHA approved list, ask your loan officer if the unit meets the FHA single-unit approval policy.
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Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
Others aren’t so diligent, and a first-time house hunter may make assumptions based on inaccurate FHA home loan details reporting that don’t serve them well later.
The purpose of this article isn’t so much to call out these publications as to remind the borrower to ALWAYS speak to a participating FHA lender about questions and concerns over a home loan in addition to any online research, as it’s easy to pick up inaccurate or outdated information.
What Time Magazine Says About FHA Mortgages
In an article titled, FHA Loan Requirements 2024, Time Magazine published the following about FHA mortgages:
“FHA mortgages don't require an inspection, but they do require an appraisal. An FHA-approved appraiser will visit the property and do a thorough check of the home. The goal is to make sure the home passes the FHA's minimum property standards...”
Is the appraisal really a “thorough check of the home?” HUD.gov published a document called For Your Protection Get A Home Inspection, which includes this:
“An appraisal is different from a home inspection and does not replace a home inspection. Appraisals estimate the value of the property for lenders. An appraisal is required to ensure the property is marketable. Home inspections evaluate the condition of the home for buyers.”
Time’s wording here may lead some to believe the appraisal is a complete “inspection” of the property and that the results will do the same thing. The two processes are totally separate and don’t provide the same data for consumers.
Appraisal vs. Inspection
Time’s assertion that the appraisal process is “thorough” does not take into account the FHA appraisal guidelines, which allow “exterior only” appraisals, which were used widely during the COVID-19 pandemic. Time Magazine isn’t deliberately misleading here, but there are missing facts. The appraisal is not a tool for the consumer.
The home inspection is the tool for the borrower, not the FHA appraisal. A home inspection is a thorough review of the home a buyer needs, and no buyer should rely on the appraisal alone.
That said, FHA appraisals can be more detailed than conventional ones.
FHA Mortgage Insurance
Time reports that, regarding FHA mortgage insurance, “FHA loans do require mortgage insurance, which is usually for the entire duration of the loan.” Which is technically true.
However, Time fails to mention here that mortgage insurance on FHA loans is required for either the full loan term or for 11 years if you make a down payment of 10% and meet FHA requirements. Mortgage insurance cancellation is not automatic.
FHA Condo Loans
Time reports. “In 2023 FHA loans can only be used on single-family homes with a four-unit cap. Buying a condo is permitted, as long as it's an FHA-approved condo.”
This is not true--the FHA modified its condo loan requirements in 2019, according to HUD.gov:
“On August 15, 2019, FHA published its Condominium Project Approval Final Rule,” which the agency says is a “single unit approval” policy that became effective for FHA loans issued for condo purchases in projects NOT on the FHA approved list.
“To be eligible for Single-Unit Approval, the unit must be located in a project that is not FHA-approved, that is complete and ready for occupancy, has at least five dwelling units, and it is not a manufactured home. The project must also meet a subset of the requirements set forth for project approval, including FHA insurance concentration, owner-occupancy percentage, and financial condition of the project.”
If you are looking to buy a condo unit with an FHA loan and the condo project is missing from the FHA approved list, ask your loan officer if the unit meets the FHA single-unit approval policy.
------------------------------
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
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