I've had two loan officers tell me two different things. One lender told me that it is not required to submit drawings and get a septic test done. Another lender told me, "a septic test needs to be done with all the drawings. That's not our call, it's an FHA requirement".

I already called the health dept. They don't have records on this house because it is too old. I represent the seller - I don't have a problem with this getting done if needed but my sellers have made all the FHA required repairs w/ no fussing about it and I don't want them to get nickle and dimed to death on this deal. I think the buyer should pay for the drawings and inspection if it's needed.

Any thoughts?

I have always had to get well/septic clearance letters from the Health Dept. for FHA loans. Not sure if it is FHA requirement or just the underwriter. Not sure about the "drawings". All we have to do is get the seller to sketch out where the well & septic are located in relation to the house so that when the health dept. goes out there they know where to look. If your contract does not specify who is to pay for this inspection, I suppose it is negotiable.

FHA no longer requires this to be done. It is up to the FHA appraiser to require it. Some still do because they are not well and septic inspectors and could not say whether the well and septic are fully functional with no problems.

Additionally the lender can require these inspection to be done. FHA requirements are mearly a minimum standard.

In the past it was required. As of January 1, 2006 it was not. Here is the memo:

FHA has made some significant changes regarding appraisal requirements that are in effect as of January 1, 2006. In a continuing effort to reform and standardize its appraisal requirements FHA has adopted more of the FNMA process regarding repair of minor property deficiencies. FHA has relaxed their repair requirements pertaining to minor repair & cosmetic deficiencies.

Per Mortgagee Letter 2005-34, FHA will no longer require the appraiser to complete the VC Sheet Section. Appraisers are required to list needed repairs to the subject property but have eliminated the actual VC Sheets. FHA has provided a more detailed examination of repairs that must be completed as opposed to repairs not required to be cured prior to closing. Mortgagee Letter 2005-48 addresses the details along with this memo.

HUD Homebuyer Summary form (HUD Form – 92654) will no longer be required to be signed by the appraiser and the Borrower within 5 days of closing. Form is no longer required with the deletion of the VC Sheets.

As always, FHA has instructed lenders to exercise sound judgment especially when determining if repairs needed are relevant to safety, sound, and structure. Lenders should continue to utilize prudent underwriting practices when any of these items are compromised and condition for necessary inspections and or repairs.

Examples of minor property conditions that no longer require automatic repair for existing properties include but are not limited to:

• Missing Handrails
• Cracked or damaged exit doors that are otherwise operable
• Cracked window glass
• Defective paint surfaces in homes constructed post 1978
• Minor Plumbing leaks (i.e. leaky faucets)
• Defective floor finish or covering (worn through the finish, badly soiled carpet)
• Evidence of previous (Non-Active) Wood Destroying Insect damage – Where there is no evidence or unrepaired structural damage
• Rotten or worn out counter tops
• Damaged plaster, sheetrock or other wall and ceiling materials in properties constructed post 1978
• Poor workmanship
• Crawl space with debris and trash

Examples of property conditions that will compromise Sound, Structure, and Safety of the occupants for which FHA will continue to require automatic repair for existing properties include, but are not limited to:

• Inadequate access/egress from bedrooms to exterior of home
• Leaking or worn out roofs
• Evidence of structural problems (i.e. foundation damage caused by excessive settlement)
• Defective paint surfaces in homes constructed pre – 1978
• Defective exterior paint surfaces in home constructed post-1978 where the finish is otherwise unprotected


Inspection Requirements

FHA no longer mandates automatic inspections for the following items and/or conditions in existing properties:

• Wood Destroying Insects/Organisms * – Inspection required only if evidence of active infestation, mandated by the state or local jurisdiction, if customary to area, or at lenders discretion. Appraiser to indicate if the State or Local Jurisdiction requires a Termite Report.
• Well/Water – Test or inspection required if mandated by state or local jurisdiction. Appraiser to include on report if any water has been contaminated in any manner; Areas of intensive agriculture within ¼ mile; Unusual taste, smell or appearance of well water.
• Septic – Test or inspection required only if evidence of system failure, if mandated by state or local jurisdiction, if customary to the area, or at lenders discretion.
• Flat and/or observable roof – FHA no longer requires an automatic inspection on flat roofs unless the appraiser specially notates a problem with the roof.

Following Inspections will continue to be required automatic inspections but are not limited to:

• Standing water against the foundation and/or excessively damp basements
• Hazardous materials of the site or within the improvements
• Faulty or defective mechanical systems (electrical, plumbing, or heating)
• Evidence of possible structural failure (i.e. settlement of bulging foundation wall)


* Underwriters should be aware of state and or local requirements; especially for loans that they consistently underwrite for in a particular state that they are located in.