Inspection Report Requirements

When you buy a house, you might be in a situation where you need a Pest Inspection (look for termites), a Septic Inspection, or a Well Inspection.  Sometimes, these costs can be included in the negotiated closing costs covered by the Seller, and other times, they might not be required at all!  Generally the Inspection Report requirements are determined by the Loan type.

These types of Inspection reports are different than a Home Inspection.  Without a doubt one of the most important things, you as a home buyer can do before settling in on that dream home, is to have a home inspection.  Done by a licensed home inspector (ASHI Certified), it’s money so very well spent.

I don’t have to tell you that  buying a  home is one of the most expensive purchases most of us make in our lives.  It’s only common sense to have it checked out by someone who knows more about the operational components in a house than most of us do.

But, as the Lender, remember that we do NOT require that you have one, and we do NOT want to see the list of repairs that are negotiated.  Once an Underwriter sees that there are problems with a home, they can’t “unsee” that.  So we don’t want a Repair report added to our contract.

Community Well and Septic System Inspection Report Requirements

In many NC Communities, there is a Community Well and Septic Systems, and those systems are monitored by the State of NC on a routine basis.  For all Government Loans we are required to obtain the most recent Letters of Convenience and Necessity detailing the Compliance with the local Health Authority Standards.  We are not required to obtain these for Conventional Loans, however, if I was a Home Buyer, I would want to see one, just to be certain everything was working as it should be.

Inspection Report Requirements For Conventional Loans

Pest Inspections for Conventional Loans are always required when the appraiser calls for it within the appraisal report.  For instance, if the appraiser noticed wood rot, they will call for a Termite report.

As the Lender, we do not have to see a Pest Inspection, even if it’s noted in the Contract that one is to be done.  The Pest Inspections are good for 120 days for a Conventional Loan.

Septic Inspection for Conventional Loans are always required when the appraiser calls for it within the appraisal report.  If there’s a strong odor, or, if an Appraiser notes on the appraisal that the ground around a Septic System is unusually wet, that could be a sign of a failing Septic System so the Lender could very well ask for a Septic Inspection to be done.

As the Lender, we do not have to see a Septic Inspection, even if it’s noted in the Contract that one is to be done.  We only need one if it’s noted by the Appraiser. The Septic Inspections are good for 120 days for a Conventional Loan.

Well Inspection for Conventional Loan are always required when the appraiser calls for it within the appraisal report.  If there’s a strong odor, the water was significantly discolored or an Appraiser notes on the appraisal that the ground around a Well is unusually wet, that could be a sign of a failing Well System so the Lender could very well ask for a Well Inspection to be done.

As the Lender, we do not have to see a Well Inspection, even if it’s noted in the Contract that one is to be done.  We only need one if it’s noted by the Appraiser. The Septic Inspections are good for 120 days for a Conventional Loan.

Having said all this, regardless of whether or not a Well and/or Septic Inspection is requested by a Lender, if I were purchasing a property I would want one done.  It is not uncommon for Wells and Septic Systems to fail, and to install a new one can be a very expensive expenditure.

Purchasing a property and then noticing that the water looks or taste funny after moving in is not a surprise that you want.  What about e coli?  We’ve seen many reports that came back with “bad stuff” in the water after the home sat vacant for several months.

The same would be true for a Septic System, however, here if the Buyer was to have a Home Inspection done, the Home Inspector generally will run the water a fair length of time to test the Septic System.  But a Home Inspector is not a Septic Inspector, and may not notice something that is not obvious to the him/her, but would give reason for suspicion to a Septic Inspector.

Inspection Report Requirements For FHA and USDA Home Loans

Government backed loans, including FHA and USDA Home Loans have similar Inspection report requirements.

Pest Inspections and Septic Inspections for FHA and USDA Home Loans are always required when the appraiser calls for it within the appraisal report.  For instance, if the appraiser noticed wood rot, they will call for a Termite report.

As the Lender, we do not have to see a Pest or Septic Inspection, even if it’s noted in the Contract that one is to be done, unless the Appraiser requires one in the appraisal.  The Pest Inspections and Septic Inspections are good for 120 days for FHA and USDA Home Loans.

FHA requires a Well Inspection is the appraiser calls for it within the Appraisal.  The Appraiser is required to note that the water quality meets health authority standards, otherwise a water test is required.  I’ve been in the mortgage business for a long time, and I’ve never seen an appraiser that could certify the water met the County Health Requirements (you have to chemically test it to be sure), so we always get a Water Test on FHA Loans.  The water test is good for 90 days, the Well Inspection is good for 120 days.

One almost sure fire way for a Well Inspection to be required on a FHA Loan, is if the Well and Septic are less than 50′-0″ apart as well as a special exception from FHA.

USDA Home Loans ALWAYS requires a Well Water Inspection.  These reports are good for 120 days.  If you are buying a newly built home, we need additional plans and specs for the property, and there are additional Inspection Report requirements.

Inspection Report Requirements For VA Home Loans

The Veteran’s Administration sets up it’s on standards and Inspection Report requirements.

Pest Inspections for VA Home Loans are always required in North Carolina due to the fact that we are in a moderate to heavy probability of potential Termite Infestation.  Pest Inspections for VA Loans are only good for 90 days.

VA borrowers aren’t allowed to pay for these Pest Inspections, the tests or repairs that follow. The VA home loan program is focused on getting service members, veterans and military families into “move-in ready” homes that are safe, sound and sanitary.

As the Lender, we do not have to see a Septic Inspection for a VA Home Loan, even if it’s noted in the Contract that one is to be done, unless the Appraiser requires one in the appraisal.  The Septic Inspections are good for 90 days for VA Home Loans.

VA Home Loans always require a Water Test when there’s a Private Well.  If there are obvious problems to the Appraiser’s eye, they will require an Inspection of the Well as well.  For VA Home Loans the Inspections are good for 90 days.

There are 2 different Well tests we see pretty often, one of them is a Metals test, the other is a Bacteria / Contamination Test. When there’s a well, and you want to get a VA loan, we are required to get a Bacteria test. We ENCOURAGE you to get the Metals test, also.

That will insure you that there’s no lead, or magnesium coming into your water. The tests take a couple of days to order and incubate – so if you know that the property is on a well / septic system let us know that at loan application. The Water test generally costs between $125 and $150.

Veterans should remember that if you are purchasing an older home, there are some minimum property standards that should be considered, and the home must meet the local and NC State building codes (which is expected).  You’ll also want to check the structure to be sure that the components have an adequate “remaining economic life.”

The Veteran’s administration is not going to make a loan on a house where the roof (for instance) will need to be replaced next month.  They also don’t want to make a loan where the property is about to included in an area that is obviously turning Commercial, or a neighborhood that has poor construction and extremely high foreclosure rates.

If you have more questions about Inspection Report Requirements, please leave a comment below, or contact Steve and Eleanor Thorne 919 649 5058.  We believe that if you are informed about the home buying process before you buy your first home, you will have a better experience!