When closing on your dream home, don’t skip the crucial step of a home inspection. This thorough examination of the home’s structure and systems covers everything from the roof to the plumbing, helping you avoid costly surprises down the road.
But do you need a home inspection for a loan? While most lenders don’t mandate a home inspection for a mortgage, it’s still a wise decision to get one before closing.
Whether you’re purchasing a property in Philadelphia, PA, or found your perfect home in Phoenix, AZ, a home inspection can transition from being optional to necessary. Here’s why a home inspection matters for your mortgage and why it’s worth investing in.
Is a home inspection required for a mortgage?
No, most mortgage lenders do not require home inspections.
However, lenders typically request a home appraisal to determine the property’s value. This appraisal helps the lender assess their risk and ensure that the loan amount aligns with the property’s actual worth.
For conventional loans, the appraiser focuses mainly on the property’s value rather than its overall condition, unless there are significant issues that could impact livability or resale value.
Despite not being mandatory for most mortgages, a home inspection remains a crucial part of the home-buying process. Issues uncovered during the inspection could potentially jeopardize the deal for some buyers, and problems discovered during the appraisal or insurance process could delay the closing.
Appraisal vs. home inspection: what’s the difference?
Is a home inspection required for government-backed loans?
Government-backed loans like FHA, VA, or USDA loans typically do not require a home inspection to qualify for a mortgage. However, some of these loans may necessitate specialized safety inspections for pests or mold that go beyond a standard home inspection.
These inspections are conducted to meet the minimum property standards set for non-conventional loans. For government-backed loans, the appraiser performs a more thorough safety inspection during the appraisal process. Any repairs identified in the appraisal for a government-financed home must be completed before the loan is approved.
When a home inspection might be required anyway
Although most mortgage lenders only require an appraisal report, there are instances where an inspection may be necessary to secure a loan.
Lender concerns after the appraisal
Issues discovered during the appraisal process may prompt a lender to request a full home inspection before approving the loan. Some repairs identified in the inspection could be mandatory for financing approval.
Pest or WDO inspections
Certain states or loans may mandate pest or wood-destroying organism (WDO) inspections, especially in humid regions or areas prone to termites. If evidence of pest damage is found, a more detailed inspection may be necessary to determine the extent of repairs.
Insurance requirements
Insurance companies might order their own inspections, particularly for older homes, high-risk locations, or recently renovated properties, to assess liability hazards before issuing a policy.
Why you should still get a home inspection—even if it’s not required
Even if your lender doesn’t mandate it, a home inspection is a wise investment for any buyer. For a minimal cost, the inspection report can provide peace of mind and protect your investment by identifying potential issues before closing.
If significant problems are uncovered during the inspection, buyers have the option to request repairs from the seller, negotiate the price, or walk away from the deal. An inspection can reveal issues that may impact insurance eligibility or financing approval in advance.
In conclusion, while a home inspection isn’t obligatory, it’s strongly recommended in the home-buying process—and can potentially streamline the lending process for all parties involved.