Property Inspections: Are They Necessary?

One question that has been commonly asked by prospective purchasers of real estate property, especially those would-be purchasers that will apply for FHA financing, is whether or not a real estate inspection is really necessary. The long and short answer to that question is, absolutely! I will make my best effort to explain exactly why this is so.

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First of all, we should understand clearly what a real estate property inspection is: The act of having a qualified (and in many states, licensed) professional take a look throughout the property you are considering buying and informing you of obvious and potential damage or problems with the property. This is not something you want your uncle Bob doing, unless of course, good old uncle Bob has had the training and experience to know what to look for to satisfy an inspection report and the knowledge to anticipate potential property breakdowns.

The smart home buyer knows that even though the property must be evaluated by a hud-approved (FHA) appraiser, this will not be enough to insure that the property will be free of deficiencies or potential breakdowns of major working components because although the appraisal must be done in accordance with HUD’s “Minimum Property Standards”, the appraiser’s primary responsibility is to determine value and not structural integrity of the property or its working components.

Many who are planning to purchase properties and obtain mortgage financing through the FHA comes with the attitude that they know there are problems with the property, but the price is very attractive and by the time it is appraised those problems will be dealt with and that is why they are purchasing the property. The problem is that the untrained eyes may miss some problems that should be addressed before moving along to other problems. The problems they are aware of may not be what ultimately causes the foundation to crumble.

For instance, if there were obvious signs of plumbing problems that could result in a leak behind the wall, you wouldn’t want to paint that wall or replace the floors until you had the possible leak checked and either confirmed or denied and repaired if necessary. Otherwise you would likely need to undo the work (wasting both time and money) that had already been done by the time you found out about the leak that a competent property inspector would have told you about before you even began working on the property.

The smart home buyer knows that property inspection reports and professional engineer reports reflect all elements of a real estate property (foundation, roofing, heating, plumbing and electricity, to name a few that are readily recognizable to us), the condition of those elements today, the life span (projected time to continue working) and whether replacement or repair will remedy the inevitable breakdown. The smart home buyer places great importance on the property inspection report in his/her purchasing decision.

Inspections are great before making an offer on a house because they actually give home buyers a bargaining chip. For the serious home buyer this is a fact that simply cannot be ignored as it directly affects the bottom line price. If the roof needs to be replaced you are justified in making a lower offer. If the electrical system needs to be updated, this is something that should be adjusted or amended in the final offer. These are also things that are easily identified by a qualified and competent property inspector. Anything that can save time and money is great when investing in property and an inspection can do both.

Another great purpose about a good property inspection is that it often sheds light on the amount of money that will be needed in order to get the house in good working condition. Knowledge is very important when purchasing a home. It can mean the difference between taking on an unknown expense or walking away if it would be too great to deal with once title and responsibility has been transferred. A purchaser should never take on a property that is pretty much guaranteed to blow a hole in the home management and mortgage repayment budget and probably the only way to avoid this is to know about it ahead of time with a property inspection report.

The smart home buyer knows that a proper home inspection can inform you of potentially hazardous conditions within the home that may not be readily apparent to the untrained eye. Some of these things include toxic mold, which can be financially disastrous as well as hazardous to your health; foundation issues, and structural damage that is threatening the integrity of the property, among many others as mentioned earlier.

An inspector should also notice the structural integrity of homes that could affect your home if they are weakened or fail all together. While these things seem so simple, it is often the simple things that lead to the greatest disasters. Whether or not you realize it, a good home inspector is one of the best tools you can have in your arsenal when it comes to purchasing real estate.

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Your support is very much appreciated. We will continue working to provide the most relevant and useful information about current FHA-insured programs and related topics. Please provide any comments, opinions or preferences which you would like us to be aware of. Thanks and God Bless!


For more about 203k, visit the HUD website; and to find out if you qualify for 203k financing, visit a HUD-approved lender at


If the government can’t run business, how come businesses always run to the government for a bailout when it runs into trouble? FHA-insured mortgages, government run for 75 years. Lest we forget?

As of July 1, 2009 a recent housing initiative was expanded to allow Las Vegas borrowers who are up to 125% underwater on their mortgages to seek mortgage refinancing. Thanks to the Making Home Affordable program!

Scheduling the Mortgage Loan Closing

A mortgage loan application generally does not reach the closing department unless an underwriter authorizes it to close by clearing outstanding conditions and ‘signing off’ on that loan. What does this mean? Well, all those who held their proverbial collective breath when the loan was submitted for underwriting can relax a bit, because signing off is indicative of the loan approval process having been a success.

This means that they will all soon be seated at a closing table reveling in what has been a successful transaction; But, there is a reason to slow down here just a bit. A closing department must coordinate with the borrower(s) and/or borrower’s attorney in order to schedule the mortgage loan closing

Closing a mortgage loan really consists of one important step between the underwriting department and the closing table. A lender’s closing department is the place where loan applications undergo final checks for items pertinent to the closing, in the sense that a closer must ascertain the presence of certain important inclusions such as:

  • A hazard insurance policy with adequate enough coverage;
  • A new survey if necessary – and if not necessary…
  • A survey inspection and/or survey reading, and;
  • A satisfactory title report complete with adequate mortgage insurance coverage, endorsements and – most importantly – the true owner(s) of record as reflected in the title report has to be consistent with the purchase contract, application docs and everything in the loan file that is relevant to property ownership.

It must be pointed out here that reports providing title, appraisal and credit data must be made part of the file while it is still in processing so that they are underwritten, but the closer still has a responsibility to make sure nothing has changed that may have a negative impact on the loan; in such a case it would be returned to underwriting for a decision to proceed or not, depending on the particular situation.

Absent any such problems, when the lender’s closer determines that everything is in order, s/he schedules a closing date & time agreeable to all parties involved in the closing (buyer, seller, their attorneys, the title closer and the lender) and a closing finally takes place.

The contents of traditional mortgage closing rooms – or offices if you like – are a twelve foot long table complete with eight to ten chairs surrounding it, several receptacles filled with various paper clip items and ink pens. There may be a calculator or two, and at least one telephone. The telephone in a mortgage closing room is as important as the table and chairs, and may be more important since documents can be signed in just about any spot in the building, including the floor if necessary.

However, the abstract company’s title closer must have a phone in order to make sure that all outstanding liens against the subject property are either paid up to date or will be paid to the lien holder’s ‘satisfaction’, who in turn will issue appropriate documents (satisfactions) as proof that the debts are satisfied.

Since the abstract/title company – hired by the borrower’s attorney to insure a client’s good title to the property – will insure a purchaser’s ownership rights as well as a mortgagee’s (the lender) legal claim (the mortgage), an attending title closer has the unenviable task of verifying, confirming and certifying all documents, figures and instruments relating to an ongoing mortgage closing in order to present a clean ‘bill’ to the parties before such closing is declared complete.

Every title closer I have known throughout my thirty year career carried a valid notary stamp and freshly inked pad. It is their stock in trade. When a title closer receives checks satisfying items on the title bill, chances are that the numbers have all been crunched, the lender’s stack of documents are all signed, the seller (in the case of a real estate purchase transaction) is relatively happy (there may have been price adjustments, but were negotiated), the borrower is nervously happy (what a debt to be repaid), and the lawyer(s) have left their clients with instructions to “contact my office” if you have any problems or concerns.

When a mortgage loan application ends with handshakes and well-wishes among parties to the transaction, it is considered to have been a success by all those who had a part in the process. The mortgage loan officer successfully originated; the processor successfully processed; the underwriter successfully underwrote; the lender’s closer successfully navigated the loan to a closing table; and the principals were successful in accomplishing what they set out to accomplish. Is it an easy process? absolutely not! Is it worth the extra time to get it right? Absolutely!

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For more about FHA-insured mortgages, please visit the HUD website; and to find out if you qualify for 203k financing, visit a HUD-approved lender at

Humorous or Ironic?

If the government can’t run business, why is it that ‘big business’ always run to the government for a bailout when it runs into financial trouble? FHA-insured mortgages… Government-run for over 75 years. Lest we forget?

Underwriting the Mortgage Loan Application

An underwriter’s responsibilities will increase under the new regulations due mostly to the changes in implementing RESPA disclosure documents (Good Faith Estimate & Truth-in-Lending). The new guidelines which takes effect on January 1, 2010 will certainly increase an underwriter’s workload, but more importantly, the flexibility in decision-making may be greatly reduced. The following paragraphs provide a glimpse of those responsibilities.

When application for a mortgage loan reaches the underwriting stage, two things are true. First, the various documents, disclosures and verifications have been provided in a manner that is acceptable to the processor; and second, the processing stage is effectively over. That is not to say that the file may not be sent back to processing, but for the most part the fate of that loan now rests with the ultimate decision maker.

It is at this stage where all parties to the transaction start to hold a collective breath. It is said that if a processor’s job is highly specialized, then an underwriter’s task is intensively so. Included with these responsibilities are the interpertation of terms, guidelines, regulations, predatory laws, and investor requirements which are repeated in casual conversations among industry professionals to underscore specific areas which may be affected as change in the industry takes effect.

An underwriter must approach these terms differently because it is the underwriter’s job and responsibility to be quite certain that each loan s/he is entrusted with is underwritten in accordance with each program guideline, and that each regulation governing mortgage lending is adhered to. In addition, an underwriter must insure that the loan is not in violation of certain predatory laws of the State in which the property is located.

Oh yes, the loan still has to be approved if it is deemed to have met all approval criteria by that same underwriter. Here is the thing which may be surprising to many outside the industry; Most of the loans do ultimately get the approval nod (or sign-off) due to an underwriter’s ability to recognize potential “red flags” during the course of working on a particular file, and require that they be removed, corrected or reasonably explained with “acceptable documentation”, where necessary.

I am fortunate to have worked with some very studious, committed and intelligent FHA underwriters who managed to balance compliance with regulations and guidelines with the pressures and demands of borrowers, their attorneys, and loan officers – I was sometimes included in that last category – and they still managed to approve loans and maintain an excellent underwriter’s rating at the same time.

HUD’s position, traditionally, was that an underwriter who wished to underwrite FHA-insured loans, must be directly answerable to HUD by undergoing HUD-endorsed training and a certification process – in addition to any and all previous education – and receiving that agency’s stamp of approval.

So when a FHA loan is approved, and the commitment letter is issued after going through the process outlined above, be rest assured that the borrower’s qualification for that loan has been well documented, and the closing is within reach.

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Thank you for your support. We will continue working to provide the most relevant and useful information about the FHA-insured program and related topics.

For more about the FHA mortgage program, please visit the HUD website; and to find out if you qualify for FHA-insured financing, visit a HUD-approved lender at


Humorous or Ironic?

If the government can’t run business, how come business always run to the government for a bailout when it runs into trouble? FHA-insured mortgages… Government-run for over 75 years. Lest we forget?