Do Mortgage Companies Require Inspections?

If you’re thinking about buying a new home or perhaps have already found one you’re interested in purchasing, you may be wondering, “do mortgage companies require inspections” as part of the mortgage process?

The answer is typically no, though different types of mortgage loans may have different requirements. Generally, whether or not you schedule a home inspection is entirely up to you. However, many buyers make their sales contract contingent on the satisfactory outcome of a home inspection.

What home inspections do I need?

While most mortgage companies don’t require inspections, you may be wondering what kinds of inspections are available to you and why you might request one. Here’s a quick rundown:

• Appraisals involve a visual walk-through of the home you’re buying, and OVM Financial requires them in order to process your mortgage loan. Appraisals, however, do not take the place of a home inspection. Appraisals are designed to help assess your new home’s value, not to determine if all of its structure and systems are in working order.

• Home inspections generally involve a visual assessment of a property’s condition, including roof and foundation conditions, HVAC systems, structural features, insulation, and functionality of major appliances. If you want a more in-depth review of your new home’s condition, you may want to line up one of the more specific inspections below.

• Termite and moisture inspections basically look for wood-destroying organisms and signs of moisture or mold. Some states require termite inspections before you can close on a home, and sometimes FHA, VA, and USDA loans will as well. But even if not required, termite and moisture/mold inspections are a good idea because remediation for termite infestations or mold could cost you thousands of dollars.

• Foundation inspections tend to be a standard part of a general home inspection, but if your home inspector suspects foundation issues, he or she may suggest you hire a structural engineer to assess potential structural concerns like drainage issues or foundation cracks that could cost you substantial funds for repairs down the road.

• Well and septic inspections are routine when you purchase a home that’s not connected to city water and sewer lines. This may be the case if you’re purchasing a rural property or an older home. An inspector can confirm that a septic system is in working order and right-sized for your home.

Wondering what inspections you need to line up based on the kind of mortgage you’re applying for? Here’s a quick rundown of home inspection requirements for different types of mortgage loans:

Conventional loans

If you’re applying for a conventional mortgage loan, you will not need to have a home inspection. However, it’s a good idea to get one regardless. A home inspection allows you to vet a property before you buy, and you can also direct the home inspector to look for specific issues of concern to you like potential faulty wiring in an older home or the likely remaining lifespan on a house’s HVAC system.

While a home inspection will cost an additional $300 to $500, it could save thousands of dollars in the long run.

FHA loans

Like conventional loans, FHA loans don’t require home inspections either. But the Department of Housing and Urban Development (HUD), which manages FHA loans, strongly urges buyers to get one. In fact, HUD requires OVM Financial to provide you with a disclosure statement noting the importance of a home inspection.

That being said, the required appraisals for FHA loans are more in-depth than those for conventional loans. FHA loan appraisers not only have to determine the market value of the home you’re buying, but they must also make sure it meets HUD’s minimum property condition guidelines. Keep in mind that the appraiser’s inspection is not comprehensive and does not take the place of a home inspection.

VA loans and USDA loans

If you’re applying for a VA or USDA loan, neither agency will require a home inspection for mortgage qualification. Unlike with FHA loans, there is no requirement for the home appraiser retained by OVM Financial to provide an inspection of the home’s condition to determine it meets basic livability requirements. That being said, don’t depend on the appraisal report to provide you any information on potential structural issues or needed repairs prior to your purchase.

Learn more about mortgage company requirements for inspections by reaching out to your OVM Financial loan officer. You can also explore our online resources to learn more about whether or not having an existing loan will affect your mortgage application, and find out if all mortgage applications go to underwriters.