FHA Appraisal for Refi

[EaglesFan2006]

I'm considering a cash-out Refi and one requirement is FHA appraisal.    I passes this 5 years  ago when we bought the house, albeit the appraisal came in low.   While the market has certainly become more favorable since 2018 in terms of value, I'm worried about a few little things such as a bit of peeling paint on the exterior.   I know they repainted it 5 years ago before we bought it (they left the leftover paint) but I read that's a potential issue.   

what other things should I be aware of in prep if I go this route?   Is chipped paint a deal breaker?  What are they looking for aside from market comps?

the Zillow estimate is roughly twice what we appraised for 5 years ago.  I know that number doesn't really mean anything but that seems to be what they base the ReFi offer on so I'm guessing it must be somewhere in that world.   But who knows.   

basically trying to know what to expect from this appraiser.   

[KR66]

A bit off topic here, but why would you choose to do a re-fi on a property you bought 5 years ago with (I'm guessing) a much lower interest rate? A home equity loan would preserve your current interest rate on your 1st mortgage............

K

[EaglesFan2006]

I was told my credit score of 677 was too low.   Believe me I tried.  Nothing is ideal but the burden of personal loan debt has really taken its toll.   If I'm able to get rid of over 50k in debt, I'll be a huge weight off.  And I can throw a large of chunk of those saved payments back into the mortgage.  

to he honest though it's irrelevant, can't imagine my house is going to appraise for what they said.  

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@KR66 wrote:

A bit off topic here, but why would you choose to do a re-fi on a property you bought 5 years ago with (I'm guessing) a much lower interest rate? A home equity loan would preserve your current interest rate on your 1st mortgage............

K

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[VAMortgageGuy]

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@EaglesFan2006 wrote:

I'm considering a cash-out Refi and one requirement is FHA appraisal.    I passes this 5 years  ago when we bought the house, albeit the appraisal came in low.   While the market has certainly become more favorable since 2018 in terms of value, I'm worried about a few little things such as a bit of peeling paint on the exterior.   I know they repainted it 5 years ago before we bought it (they left the leftover paint) but I read that's a potential issue.   

what other things should I be aware of in prep if I go this route?   Is chipped paint a deal breaker?  What are they looking for aside from market comps?

the Zillow estimate is roughly twice what we appraised for 5 years ago.  I know that number doesn't really mean anything but that seems to be what they base the ReFi offer on so I'm guessing it must be somewhere in that world.   But who knows.   

basically trying to know what to expect from this appraiser.   

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No the chipped paint is not a deal breaker, at most you'd be required to scrape and repaint those areas.

I would not be at all surprised if your home appraises for a significantly value then it did 5 years.

[ShanetheMortgageMan]

This isn't a complete list of what FHA appraisers look for in terms of property condition, but it's a good starting point plus it's from an FHA appraiser:

• Utilities should be turned on so the appraiser can test systems and appliances.
• Appliances must function properly.
• There should be proper drainage around the perimeter of the house.
• The heating unit must be in working order (and AC if applicable).
• Water pressure must be adequate for the house. Appraisers flush toilets, turn on all faucets and ensure that both hot and cold water are working.
• The water heater must be in working order and strapped according to local code.
• Attics and crawlspaces are to be viewed at minimum from the shoulder up by the appraiser. When viewing the attic, appraisers make sure there are vents, no damage, no exposed or frayed wires, and that sunlight is not beaming through. When inspecting the crawl space, appraisers make sure there are no signs of standing water or any other foundation support issues. Excessive debris in the attic or crawl space should be removed.
• Paint must not be chipping, peeling, or flaking on homes built before 1978 because of the danger of lead-based paint (lead was used in paint prior to 1978). However, there must be no defective paint or bare wood for properties built after 1978 because defective paint impacts the economic longevity of the property. Defective paint should be scraped and repainted (with no wood chips on the soil).
• Electrical outlets must work (outlets should have a cover plate also).
• Toilets must flush and be mounted.
• Any active termite infestation needs to be cured.
• Minor cosmetic issues such as stained carpet or a need for interior paint are okay. The house does not have to be perfect, but if there are issues that impact health and safety or the longterm economic viability of the property, then those issues must be cured.
• Windows must open and close and they cannot be broken. Minor cracks can be okay so long as there is not an issue with safety, soundness and security.
• No dangling wires from missing fixtures or anywhere else.
• FHA doesn't require air conditioning, but if present the system should work as intended.
• Smoke detectors & carbon monoxide detectors are required insofar as required by local code
• The firewall from the garage to the house should be intact. Missing sheetrock, a pet door installed in the door, a lack of self-closing hinges, or a hollow door could pose a safety issue.
• A roof should not be leaking and needs to have at least two years of economic life left.
• A house will be rejected if the site is subject to hazards, environmental contaminants, noxious odors, or excessive noises to the point of endangering the physical improvements or affecting the livability of the property (this isn’t an issue for the vast majority of properties).
• A trip hazard is a subjective call to make by the appraiser and not necessarily an automatic repair, but if there is a legitimate safety issue it should be called out by the appraiser.
• There are things any appraiser will call out in an FHA appraisal, but there are times when appraisers have to consider how the spirit of FHA might apply in a situation. FHA is black and white on many issues, but other times appraisers simply need to use good judgment.