More FHA Loans Will Require Two Appraisals in The New Year

by Heindrick So
January 5th, 2009

As the New Year has finally begun, I wanted to point out two key changes FHA borrowers can expect to see in this coming year. The first issue has been the change to the FHA down payment requirement; a change that we’ve heavily covered and seen some borrowers face since late last year. But in cased you missed it, as of January 1st 2009 FHA purchase loans will now require a down payment of at least 3.5 percent. 

 The other changes have been a few key updates to the FHA appraisal requirements which also began on January 1st 2009. One thing new for 2009 is that more FHA loans will now require two appraisals to be eligible for FHA. 

Appraisal Changes for the FHA
– A few weeks ago, we covered the recent update from HUD requiring FHA approved to use state certified appraisers for their FHA mortgages. If you missed the story, you can view our previous post here. Essentially, by limiting themselves to state certified appraisers, HUD limits its exposure to possibly exaggerated or over inflated appraisals.

FHA Second Appraisal Requirements
In December of 2008, HUD announced a change in requirements for second appraisals that would take effect January 1st of 2009. In the letter supplied by HUD, a second appraisal will now be required for all cash out refinances where LTV exceeds 85 percent of the appraised value. Before, a second appraisal was only required if the home was located in a declining market, the loan was above $417,000, and exceeded a 95 percent loan to value ratio. If you still meet these three requirements, you’ll still need that second appraisal as well. 

The costs of two appraisals may be an issue for borrowers, but the key issue is that the FHA is taking steps to limit its exposure to risky loans. In comparison to conventional mortgages, FHA loans still remain competitive as it often results in fewer pricing hits during a cash out transaction–meaning lower monthly mortgage payments for borrowers.

And although some of these changes might seem more like obstacles to FHA borrowers, the New Year has presented some welcomed changes to many individuals. Most notably, first time homebuyers and investors have found that the combination of lower mortgage rates and discount homes have made it a prime time to buy. And since FHA “increased” its maximum loan limits to $625,500 permanently in certain areas, many are still finding ways to take advantage in this current housing market.

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This entry was posted on Monday, January 5th, 2009 at 12:20 pm and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

8 Responses to “More FHA Loans Will Require Two Appraisals in The New Year”

  1. Phoenix Realtor Says:

    So, it looks like the 2 appraisals only comes into play on a cash-out refi.

    Are the only changes to purchase money a 3.5% down from 3% and 1.75% MIP from 1.5% and a.55 monthly mi factor up from .50?

  2. John Says:

    What if you had your case number before jan 1 2009 and are to close in Jan for a cash out refinance, Do you still need a second appraisal?


  3. Scott Says:

    I started my refinance before the 1st of the year and would like to know the same thing. Do I still need a second appraisal? I would have to think that since I started the process before this new amendment came into play, I shouldn’t have to have a second mortgage.

  4. Monica Says:

    What if there are no comparables in the area in which you are trying to purchase a home and land? What are the guidelines for a FHA appraisal in the above circumstance?

  5. LORI JAHNS Says:

    I need advice on a conflicting matter of ineliageable property i feel the appraiser misunderstood the purpose of the shop and now i need to prove to the underwriters that my property is eliagable my shop is 48.2x 56
    and my home is 27×66.5 we have finished bedrooms and kitchen area in the shop we have moved our teenaged boys outhere does this make it ineligable
    we have aconstruction business also but i own and pkeep my tools onthe 30 acre parcel that surrounnds my home please advise me

  6. Spartans Says:

    Yep, Im close to closing on a home right now… My loan processor just told me a 2nd appraisal is now required for closing and I have to wait to get that done

  7. Bryce Says:

    Iam selling a home and the lender is requiring the borrower to purchase 2 appraisals on the property. I was told its because the property is purchased and resold with in six months. Some say this is all new FHA loans. Either way, lenders dont release this unitl the 2 days before contract closing date. Whats new?

  8. Carl Says:

    After reading through “HUD 4155-2, Lender’s Guide to the Single Family Mortgage Insurance Process” I am led to believe that if I sell a property between 90 and 180 days at a sale price for more than 100% of the original purchase price, 2 appraisals will be required. Does this “original purchase price” include the closing costs and other fees I paid at closing? I purchased a property at auction for $66K which turned into about $78K by the time closing occured. If I sell the property for less than $156K, will only one appraisal be required?
    Thank you,

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