Buying a new home can be an exciting time for a home buyer, but the paperwork and formalities involved in the process can be confusing. Many buyers wonder is a home inspection required for a conventional loan before the sale can be completed? This depends on the type of loan involved as well as several other factors.
What Home Inspections Are Required?
Home inspections are generally not required for a conventional mortgage loan, but they are a good idea to give buyers a better picture of the condition of the property. However, lenders will usually require a home appraisal before funding a loan.
An appraisal is not the same thing as a home inspection. While an inspector will look at the condition of the property and identify safety issues, an appraiser’s main focus is determining the home’s current market value. They will look at recent sales data in the area and use other tools to calculate how much the property is worth under the current market conditions.
Mortgage lenders usually require home appraisals to ensure that the property is worth the amount of money the buyer has agreed to pay for it. Because the property is being used as collateral for the loan, it is important to ensure that it will cover the full amount if the borrower defaults.
An appraisal is less thorough than an inspection and will look at the property’s size and overall condition. Although a property does not need to be in perfect condition, things must be in working order to pass.
In the appraisal, the home will be given a quality rating by the appraiser that will reflect the property’s overall condition and quality. Although certain problems will not be deal-breakers, any deficiencies that are found in the home during the appraisal cannot affect its safety.
One safety issue that an appraiser might identify is peeling paint. If the home was built before 1978, it may contain toxic lead-based paint, so any paint peeling around the structure must be addressed. Similarly, if stairs lack properly secured handrails or have dangerous steps, the homeowner might be required to fix them.
In a home that has a septic system or private well, a lender might require water testing depending on the location and whether the appraiser notes something that could indicate contamination. In short, anything that could lead to unsafe living conditions will be identified by the appraiser.
The appraisal report must also describe any physical deficiencies that could affect the property’s soundness. The age of the roof is one consideration. Appraisers will generally assume that a roof has a lifespan of 20 years and will want to see at least three years left or they may flag it in the appraisal.
Similarly, appraisers will flag major issues related to the home’s electrical, plumbing, heating, ventilation and air conditioning. Any systems that are not in working condition may need to be repaired before the bank will secure the loan.
Structural Integrity Of The Property
In addition, deficiencies in the home cannot affect the structural integrity of the property in any way. In some cases, if the appraiser finds an active roof leak or issues with the shingles, a qualified professional will need to inspect the roof to see if it meets the conventional loan roof requirements.
Home Inspection Not Required But A Good Idea
Although a home inspection is generally not required when getting a conventional loan, that does not mean that homeowners cannot or should not carry one out on their own to look for potential problems. A home inspection typically costs around $300 to $400. Many homeowners believe that is a small price to pay for the peace of mind that can come from carrying out some due diligence. It could also save them a lot of money in the long run and help them prepare for expenses that may come up in the near future.
Pest Or Other Inspection Only If Evidences Supports It
Should the appraisal find evidence of wood-boring insects, abnormal settlement or dampness, the appraisal should address their effects on the property’s value and marketability. Evidence that the condition has been corrected or that it does not pose any threat of structural damage may be required.
Any additions that have been made to the property that lack the required permits will also require the appraiser to note the work and assess its impact on the market value of the property.
In some cases, an appraiser may mark the appraisal as “subject to” if there are certain adverse conditions that require expert input, such as mold, water seepage, electrical or plumbing inadequacies, roof issues or environmental hazards.
Get In Touch With Conventional Loan Experts
If you are looking to buy a new home, get in touch with the conventional loan experts at My Lending Pal to learn more about their offerings.