Chapter
1
Appraisal and Property Requirements Page 1-08b A
complete list of items required for high/low ratio loans found in
HUD Handbook 4145.1 Appendix 11. 1.
Proposed Construction are properties approved for mortgage insurance
prior to the beginning of construction, defined as the first placement of concrete
or other permanent materials. This means that the DE Statement of Appraised Value
or Early Start letter has been issued by the DE Underwriter for the property prior
to the first placement of concrete or other permanent materials.
2.
Under Construction are those properties in which the first placement
of concrete or other permanent materials has begun, but construction is not yet
100% complete. 3.
Existing Construction properties that are 100% complete at the time of
appraisal. "Complete" means everything is complete including the installation
of buyer preferences (flooring, appliances, etc.), utilities are on and fully
functioning and all site improvements completed at the time of appraisal (Ready
for Occupancy). If no repair or correction conditions are made by the appraiser,
the appraisal serves as the final inspection as per HUD Handbook
4145.1 Paragraph 6-3-A(3). 4.
Pre-Approval For a high ratio loan, HUD requires the property to be pre-approved
prior to the start of construction and obtain the required construction inspections,
which; at a minimum are the initial, framing and final inspections. If the property
is not pre-approved with evidence of the required inspections, then a final inspection
and a HUD approved 10-year warranty is required for a high ratio loan. a. Pre-Approval: HUD defines pre-approval as follows: - Appraised
prior to the start of construction. The property is appraised and the DE lender
issues form HUD-92800.5b,
Conditional Commitment/Statement of Appraised Value, prior to the start of construction,
OR
- Building Permit & Certificate of Occupancy. (Mortgagee
Letter 2001-27) In those jurisdictions that issue BOTH a building permit prior
to the start of construction, (or it's equivalent) and a certificate of occupancy,
(or it's equivalent), HUD will accept these as evidence of pre-approval and inspections.
This process DOES NOT apply to condominium properties or manufactured housing
due to special requirements applicable to these housing types. OR
- Early
Start Letter issued prior to start of construction. Builder may request an early
start letter prior to the start of construction, completion of the appraisal and
issuance of HUD-92800.5b
Conditional Commitment/Statement of Appraised Value.
- Regardless of the
process used, the lender must certify by using Form HUD
92900-A, page 3, that the property is 100% complete (both on site and off
site improvements) and that the property meets HUD's minimum property standards.
(See Mortgagee
Letter 2001-27)
b. Inspections: HUD accepts the following
new construction inspections: - FHA Compliance Inspections. When the
inspections are performed by an FHA Compliance Inspector, form HUD-92051
Compliance Inspection Report must be completed and submitted in the case binder.
- Local
Building Department Inspections -Copy of building permit and certificate of occupancy
(or their equivalent) for properties that meet the requirements of Mortgagee
Letter 2001-27.
- Appraisal, only if the property is 100% complete at
the time of appraisal and meets the requirement of HUD Handbook
4145.1 Paragraph 6-3. This includes completion of grading, drainage and functional
utilities.
Note: HUD does not accept final inspections by local
authority on condominiums or manufactured homes. An FHA compliance inspector must
complete final inspections for these property types. For manufactured homes, HUD
will also accept inspections by the engineer that completed the foundation certification.
C. Re-Sales: HUD/FHA will treat re-sales to a second
or subsequent purchaser of new less than one year old properties that are 100%
complete including all on and offsite improvements as existing properties and
the new construction exhibits normally submitted will not be required, provided
that:
1. The re-sale is an arms
length transaction. 2. The lender shall clearly identify the transaction is
a re-sale to a second or subsequent purchaser in the case binder to avoid an NOR
issued by the Homeownership Center for missing new construction exhibits. 3.
For manufactured home properties, the engineer preparing the foundation certification
is required to make a site inspection and the property must be 100% complete at
time of inspection. Foundation certifications based on proposed construction will
not be acceptable. 4. While a builder selling a newly built home is not subject
to the property flipping rule, a subsequent seller would be.
Construction
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