If you`re considering purchasing a home with a Federal Housing Administration (FHA) loan, you`ll want to familiarize yourself with the FHA sales contract addendum.
The addendum is an extra document that`s attached to the purchase agreement and is specifically tailored to FHA loans. It outlines certain requirements and conditions that must be met before the loan can be approved.
One of the most important requirements of the FHA sales contract addendum is the appraisal. The appraisal must be conducted by an FHA-approved appraiser and must meet certain criteria. The appraiser must inspect the home and ensure that it meets certain safety and livability standards.
Additionally, the addendum requires that the home must be free from any hazards that could pose a risk to the occupant`s health or safety. This includes things like lead paint, asbestos, and radon.
Another important requirement of the addendum is the seller`s contribution to the buyer`s closing costs. The seller is limited to contributing a maximum of 3% of the purchase price towards the buyer`s closing costs.
The addendum also outlines certain repairs that must be made before the loan can be approved. These repairs are typically related to issues that could pose a safety or health hazard, such as a damaged roof or faulty electrical wiring.
In some cases, the addendum may require that the buyer obtain specific types of insurance, such as flood insurance or earthquake insurance, depending on the location of the property.
It`s important to note that the FHA sales contract addendum can vary depending on the state and the lender. It`s essential that both the buyer and the seller carefully review the addendum and understand its terms before signing the purchase agreement.
While the addendum may seem like an additional burden, it`s actually designed to protect both the buyer and the seller. By ensuring that the property meets certain safety and livability standards, the addendum helps to prevent potential issues down the road.
In conclusion, if you`re considering purchasing a home with an FHA loan, it`s essential to understand the requirements outlined in the FHA sales contract addendum. By working with your lender and carefully reviewing the addendum, you can ensure that the purchase process goes smoothly, and you can move into your new home with confidence.