Is A Home Inspection Required For A Conventional Loan? 

Residential properties, including family homes and condos, among others, are the hot sellers on the real estate market. And among all mortgage options, conventional loans have turned out to be an overwhelmingly favorite method of financing a new home. 

Not to mention, a lot of existing homeowners are also looking to conventional mortgages for refinancing, thanks to their flexibility and lucrative terms. 

However, there’s one question that a lot of potential buyers and existing owners keep asking, which is, ‘Is a home inspection required for a conventional loan?’

Simply put, most of the lenders don’t require you to conduct a home inspection for a conventional mortgage. 

But depending on the lending company and the type of mortgage, you may still be required to get a home inspection. 

Wondering what’s more to mortgage inspection and whether or not you need to conduct one? 

Well, we’ve compiled everything about conventional loan home inspection requirements. Also, we’ve shared our expert tips for speedy inspections and seamless mortgage approvals. 

So let’s dive right in and have a look up close. 

Is a home inspection required for a conventional loan or not? 

As we just discussed, lending firms don’t usually need a home inspection report before they approve your conventional home. 

Nevertheless, if your mortgage amount is high or covers a significant portion of the total value of the home, the lenders might require an inspection. That’s because every conventional loan that’s issued is an investment for the lenders, and they want to ensure it’s a safe one. 

Also, in some cases, the lender might recommend a thorough pre-purchase home inspection, even if it’s not necessary for the purpose of loan approval. 

And it makes sense to heed their advice. After all, you don’t purchase a home every day, and a few hundred dollars spent on inspection can give you unparalleled peace of mind. 

Fair enough, isn’t it? 

Now, before we get into the importance of an inspection before a mortgage, let’s understand when and why you might need a home inspection before loan approval. 

Do conventional loans require inspection before approval? 

Although conventional loans are much more lenient compared to other mortgages in the sense that they don’t mandate an inspection, you might still need one. 

You see, government-backed mortgage schemes have a string of requirements, including inspection and appraisal. But that’s not the case with conventional mortgage plans offered by banks and backed by private investors. 

Nonetheless, private lenders also have certain standards that they require your property to meet. 

For instance, most conventional lenders follow Fannie Mae’s rules, which call for certain criteria that your home should meet. And this includes the following: 

• It should be a single-family or multi-family home with a maximum of four units. 
• You should be able to purchase it using a loan amount within the current conforming loan limits after making the down payment. 
• The property should be located either in the US or American territories (Guam, Puerto Rico, or the US Virgin Islands). 
• The structure should be residential.
• The property should be securable as real estate. 
• Home building should be safe, sound, and structurally secure. 
• It should be insurable for contingencies such as flood and other risks. 
• The property should be accessible by a road in accordance with local codes. 
• It should be connected to basic utilities such as electricity and water as per local codes. 
• It should be fit for round-the-year use. 

Similarly, the lenders will also require a home appraisal to verify its real value before leading out a mortgage. 

And to meet Fannie Mae guidelines or address home appraisal findings, you’ll need a thorough home inspection, more likely than not. 

Wondering when you might need a home inspection for a conventional loan? 

Well, let’s have a look. 

When does a conventional loan require a home inspection? 

As you can see, meeting Fannie Mae’s conditions and getting a home appraisal are two prerequisites before your lender can approve a conventional loan. And you might need a home inspection for both. 

To start with, let’s see when you might need an inspection to meet Fannie Mae’s rules:

A. The guidelines clearly call for ensuring that the property is “safe, sound, and structurally secure.” And the only way to know if the home in question meets this condition is an inspection. 

B. Another Fannie Mae rule says that the property you’re purchasing should be insurable for natural and other hazards. This may require you to conduct an insurance inspection.

For instance, insurance companies in Florida require a 4-point home inspection for insurance coverage. Meaning this could be a criterion for establishing the insurability of your home. 

C. Finally, the guidelines suggest the property should have utilities like electricity as per local codes. And to determine whether or not the property’s utilities meet local codes, you might need specialized inspections such as an infrared thermography inspection. 

Apart from Fannie Mae’s, a conventional loan also needs a home appraisal report to understand the market value of the home. And the appraisal, in return, often relies on a comparison with similar properties to provide an accurate value. 

Now, the appraiser might spot some issues and highlight them in their report, thus alarming the lenders. This can necessitate a home inspection to establish the extent of damage and safety of the property before loan approval. 

Is a home inspection before loan approval mandatory? 

Conventional lenders don’t have any written rules about home inspections before a loan issuance. However, you should remember that they do have some unwritten requirements in place regarding the overall condition of the home. 

Also called the conventional loan home condition requirements, these have to do with the property’s safety and can impact your mortgage approval. 

For instance, the lenders don’t want to invest in a property that isn’t safe or has underlying issues. So, they might ask you to include an inspection contingency clause in your purchase agreement and conduct a home inspection. 

Talking about the inspection itself, it’s likely that it brings out hidden problems such as pest or termite infestation, lead or asbestos contamination, etc. And that’s especially true if you’re purchasing an old property or looking to refinance. 

In these situations, the lender will approve your mortgage only after the seller eliminates the problems entirely. 

Does a conventional loan home appraisal require inspection? 

No, a home appraisal in order to meet conventional loan requirements doesn’t need an inspection. 

However, an appraisal might lead to an inspection. Here’s how: 

You see, a home appraisal is meant to evaluate the fair market value of a property. Herein, a home appraiser examines the home and compares it with similar properties in the neighborhood, especially those that have recently sold. 

And while the idea behind a conventional loan appraisal is to ensure that the lenders don’t pay more than what the home is worth, it also protects the buyer’s interests. 

For instance, sellers might set an asking price that’s way more than the property’s value. So not only does an appraisal protect you from overpaying, but it also guarantees lenders that they can recover their investment during foreclosures. 

Now, during the course of appraisal, the home appraisers might notice some visible problems. And although they aren’t home inspectors, they can list issues such as chipping paint or loose hanging wires, among others. 

This is enough for lenders to become cautious and ask you to get a complete home inspection before they approve the mortgage. 

Bonus: We suggest a pre-appraisal third party home inspection for a seamless mortgage approval 

No matter how well-kept a property is, it can still have some visible problems. And it’s only a matter of time for the appraiser to notice and flag them in their report. 

Not to mention, a negative remark by the appraiser doesn’t only delay mortgages, it also leads to denials. 

As such, by having a third home inspection before appraisal, you can have a clear understanding of the problems and ask the seller to fix them. Also, you can determine if the home is worth investing in. 

Curious as to what a third party home inspection is all about? 

You can go through our blog – Third Party Inspection For New Home: A Complete Guide. 

Conventional loan home inspection: What is it all about? 

As the name suggests, a conventional mortgage inspection is a home inspection that’s done to meet the lender’s requirements. 

For instance, you may want to conduct a home inspection to ensure that the property meets Fannie Mae’s guidelines. Similarly, you might be looking for an inspection before loan appraisal in order to address the areas of concern.  

These inspections typically find the following: 

• Structural or foundational problems that can pose safety risks. 
• Roofing or flooring issues that signal a larger problem at hand. 
• Plumbing, electrical, and HVAC system analysis to see if they’re compliant with local codes. 
• Termite or pest infestation. 
• Whether or not the insulation system is intact. 

The above problems can endanger the safety of the property and cost thousands of dollars to fix. So, a mortgage inspection ensures that you’re buying a sound home and guarantees the lenders that it’s a safe investment to make. 

Also, it offers you a chance to flag the problems to the seller and settle them before you close the purchase deal. 

Conventional loan inspection checklist: What does it include? 

A mortgage inspection involves a licensed home inspector who looks at the following areas of the property:  

• Home foundation 
• Flooring 
• Windows and doors 
• Walls
• Ceiling and roofing
• Plumbing 
• Electrical systems  
• Vapor or moisture barrier 
• Septic tank

How much does a conventional loan home inspection cost? 

A conventional loan inspection can cost you anywhere between $225 and $629. The actual will be determined by a lot of factors, the most important of which is the size of the property. 

Also, the inspection costs differ for different regions. 

For instance, the average cost of home inspection in Florida is $325. But it might not be the same in other states. 

Wondering how much you can expect to pay for a complete home inspection in Florida? 

You can go through our blog – How Much Is A Home Inspection In Florida? 

What if the inspection finds major defects that need extensive repairs?  

It is commonplace for home inspections to throw up significant damages that are otherwise hidden. And that’s more often the case with older homes. 

But that doesn’t mean your lenders will outrightly deny a mortgage. They will, however, require you to ensure that essential repairs are made and the home is up to order before closure. 

In fact, they may not approve the mortgage till all the problems are adequately addressed and repairs finished. 

This shouldn’t be a major concern when buying a home, as it’s the seller who’s required to bear the repair expenses. 

Nevertheless, if you’re looking to refinance your home, any potential issues that the inspection might find will have to be fixed at your own expense. 

What are the general conventional loan requirements? 

Apart from home inspection requirements, a conventional loan also has certain necessary conditions that have to do with your personal finances. 

In all, here are the conventional loan requirements in Florida as per Fannie Mae’s guidelines: 

• A minimum credit score of 620 and a clean credit history. 
• Two years of consistent employment and income. 
• A minimum 20 percent down payment. 
• A DTI ratio below 36 percent. 
• Total loan amount not exceeding loan limits. 
• Sufficient savings in the bank. 

You might also want to read – Mobile Home Inspection Checklist: Everything To Know About. 

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Conclusion 

You see, the question as to is a home inspection required for a conventional loan or not is highly subjective and has no clear answer. 

For instance, although there’s no written rule about inspection, it is the only way you can meet the requirements of conventional lenders. 

Not to mention that you can also get a mortgage approved without any inspection at all, especially if you’re buying a newly constructed home. 

Nonetheless, it’s a smart move to get a property inspected to avoid any problems or delays with financing. 

Looking to get a conventional loan home inspection? 

You can get in touch with us!

We are Homestead PI, a leading South Florida inspection company with over a decade of experience in inspecting a diverse range of residential properties. From single-family homes to mobile homes to condos and more, you name it, and we’ve got you covered.