Applying for a reverse mortgage is a process and part of that process is an FHA appraisal.
A lot of borrowers have questions around the appraisal process, what to expect and some tips to prepare for it. In this blog we try to go through the most important things you should know going into the process.
The first thing you should know is every reverse mortgage, whether it's a HECM (FHA reverse) or a lender offered reverse, will require at least 1 appraisal and potentially 2. Although it's less likely you'll need 2 appraisals it happens enough that every loan officer should prepare you for the possibility of one.
The actual appraisal is ordered along with the application and because it's an FHA appraisal they tend to run a little more expensive than traditional appraisals. This is because they require more work from the appraiser and a lot of times this means that getting an appraisal may be a little bit slower than you'd otherwise expect since not every appraiser is willing or able to do an FHA appraisal. This becomes even more of a problem if you live in a rural area.
During the appraisal, your appraiser will snap some photos, meausure the square footage of the living space in the home and keep an eye out for any safety issues and FHA compliance concerns. These might include items like: termite damage, limited roof life, missing railings on porches and stairs, lack of entries and exits into bedrooms.
The appraiser will also attempt to 'bracket' your property with comparable homes sold in the last 6 or so months within your neighborhood. Bracket simply means, finding a home of lesser value and a home of greater value to end up at a fair value for your home. If the appraiser cannot bracket your home, you will likely not be able to use the appraisal and cannot proceed with your loan at this time. While rare, this can occur in rural areas of the country or with homes that are so unique there are not enough comparable homes to work from.
To prepare for your appraisal here are some tips!
1. Clean up the clutter. Making a good first impression is never a bad idea when valuing a home and the appraiser will need easy access to the attic and crawlspace if the home has these. Clutter can also be seen as a safety issue potentially.
2. Remove beds from any rooms that don't have at least 2 points of entry and exit. If you can't get in and out of a room with multiple entries, FHA regulations do not consider it a bedroom and it can cause issues.
3. Make sure you have smoke detectors and carbon monoxide detectors installed. Although states may have different rules on whether this is necessary, the FHA appraisal will require documentation of these properly installed and working.
If you have any other appraisal related questions, don't hesitate to ask!
