Buying a home is an exciting milestone, but it can also feel overwhelming navigating the mortgage process If you’re considering a conventional loan for your purchase, you may be wondering – what are the property inspection requirements? Conventional loans are mortgages not backed by government agencies like FHA or VA loans, so do they have more flexible rules regarding inspections?
Let’s break down what you need to know about home inspections for conventional loans.
What is a Conventional Loan?
A conventional loan is a mortgage not insured or guaranteed by a government entity. Instead, they are underwritten by private lenders like banks, credit unions, mortgage companies and meet guidelines established by Fannie Mae and Freddie Mac.
Conventional loans typically have stricter credit score and down payment requirements than government-backed loans, but have more flexible rules regarding the condition of the home
Are Home Inspections Required for Conventional Loans?
The short answer – no Conventional loans do not require a home inspection to be approved However, just because it isn’t mandatory doesn’t mean skipping an inspection is wise. Let’s explore why
Protect Your Investment
A home inspection allows you to evaluate the true condition of the property. While cosmetic issues are easy to spot, only an inspection can uncover structural problems, electrical issues, leaks, faulty HVAC systems, and more.
Catching these major defects early protects you from expensive repairs down the road.
Gain Leverage in Negotiations
If issues are discovered during the inspection, you can use the findings to negotiate with the seller. Perhaps they will agree to lower the price or make repairs. The inspection gives you an informed position to negotiate from.
Obtain Peace of Mind
There’s nothing worse than buying a home blindly only to have problems surface later. A home inspection offers peace of mind, allowing you to make a confident, educated purchase.
So while not required, a home inspection is highly recommended for all homebuyers, especially with older homes.
What Home Inspections Might be Required?
While a general inspection is optional, there are cases where a lender may require specialized inspections for a conventional loan:
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Pest inspection – If there are signs of termites or other infestations, an inspection and clearance letter may be needed. This is common with older homes.
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Well/septic inspection – For rural properties on well and septic systems, an inspection may be required to ensure they are in good working order.
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Flood hazard certification – In high-risk flood zones, an inspection to assess flood risk may be required.
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Engineer’s inspection – If the appraisal uncovers structural issues or major repairs needed, an engineer’s inspection may be mandated to ensure stability.
So while not needed across the board, be prepared for the possibility of specialty inspections based on the home, location and appraisal findings.
Does My Conventional Loan Down Payment Affect Inspections?
An important point – on conventional loans with less than 20% down payment, some lenders may require a home inspection. Why?
With less equity invested, there is more risk for the lender if the home has undisclosed issues. The inspection helps mitigate this risk.
So if your down payment is low, your lender may be more inclined to require a general inspection, even though it’s not mandatory for a conventional loan.
Timing Your Home Inspection
You want your home inspection done once you are under contract but before closing. This allows you to terminate the contract or re-negotiate based on inspection findings.
Ideally, schedule it for 1-2 weeks after the home goes under contract. This gives you breathing room if issues arise.
Can I Get By With a Limited Inspection?
Some homebuyers try to save money by opting for a more limited inspection, such as:
- Radon testing only
- Mold sampling only
- Thermal imaging only
But this piecemeal approach is risky. Only a comprehensive inspection thoroughly vets all home systems and structure. Don’t cut corners here – the cost is well worth it.
Who Pays for the Home Inspection?
The home inspection is paid for by the buyer. Expect to pay $300-$500 for a general inspection of a single-family home. Higher end homes may cost slightly more.
Some first-time homebuyer programs will cover the cost of an inspection, so check if you qualify. Veterans also receive a free inspection when using their VA loan benefit.
Can I Attend the Home Inspection?
Absolutely! I strongly advise attending your home inspection. Following the inspector allows you to see issues first-hand and ask questions.
Many problems not obvious to an untrained eye are easily spotted by an experienced inspector. Tag along and use it as an educational opportunity.
What’s Covered in a Home Inspection?
A general home inspection will cover all physical aspects of the interior and exterior:
- Structural foundation, framing, floors and walls
- Electrical system and outlets
- Plumbing pipes and fixtures
- HVAC heating and cooling systems
- Water heater
- Roof, gutters, chimney and attic
- Insulation and ventilation
- Major appliances
- Fireplace and wood stove
- Garage, windows, doors, ceilings, walls and floors
Outbuildings like pools, hot tubs and detached garages can be included for an added fee. Prospective condo buyers will also need a separate condo/building inspection.
Can I Request Specific Tests?
Within a general inspection, you can request the inspector perform additional tests for peace of mind:
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Radon – A radon test kit can detect this invisible, odorless gas that seeps into homes from surrounding soil. Long-term exposure increases lung cancer risk.
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Lead – In homes built before 1978, a lead paint test can be performed. Especially important if you have small children.
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Mold – Air or surface sampling to check for excess mold. Helpful for older homes or moisture problems.
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Asbestos – Sampling to detect asbestos fibers, which can pose health risks if disturbed. Most common in insulation.
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Water quality – Test for contaminants including bacteria, nitrates, arsenic and pesticides. Recommended for private well water.
Discuss any special testing you want done when booking the inspector.
Are Home Warranties Worthwhile?
Some real estate agents pressure homebuyers to purchase a home warranty during inspection negotiations. Are they recommended?
Home warranties can offset repair costs by covering defects with home systems and appliances after you move in. However, they come with many limitations:
- High service fees per repair call
- Many exclusions for older items
- Low coverage caps for certain repairs
- Difficult claims process
Carefully read the home warranty policy before purchasing. While they offer some protection, significant out-of-pocket expenses may still apply for repairs.
Can an Inspection Go Too Far?
There’s a limit to what a home inspection can reasonably cover. While inspectors are thorough, they cannot dismantle or destroy any part of the home.
For example, an inspector won’t:
- Take apart walls or floors
- Dismantle A/C units
- Uncover underground drainage pipes
- Enter unsafe spaces like a crumbling crawlspace
Minor cosmetic flaws are also beyond the scope. The focus is structural and system function only.
Finding the Right Home Inspector
This is a very important decision – a poor inspector can miss costly defects. When choosing an inspector:
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Verify credentials – Look for membership in national home inspector associations like ASHI, NAHI or InterNACHI. These groups require training and certification testing.
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Check reviews – Search online reviews and ask real estate agents for inspector referrals. Look for consistently positive feedback.
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Interview inspectors – Ask about their experience, what’s covered in the inspection, and if they offer thermal imaging and other advanced testing.
A Scheduling Tip: Don’t use an inspector recommended by your real estate agent. There’s an inherent conflict of interest. Pick your own trusted inspector to get an unbiased evaluation.
Are Fixes Required Before Closing on a Conventional Loan?
For minor issues identified, your lender won’t require repairs upfront. But if there are major structural, electrical or plumbing defects, they may make loan approval contingent on getting them fixed first.
Why? Major undiscovered property damage could impact the property value and put their investment at risk.
Expect to provide invoices or certification from licensed contractors that major issues were corrected prior to closing. For smaller fixer items, your lender will generally allow you to close and make those repairs later.
Wrapping Up on Conventional Loan Inspection Requirements
While not formally required, a home inspection gives invaluable insights into the prospective property you’ll be investing in. For a small upfront cost, you gain peace of mind while protecting yourself from the burden of unanticipated repairs.
Work inspection negotiations carefully with your seller, and don’t hesitate to call in a specialist for
Conventional loan home inspections
Although conventional loans don’t require a home inspection, it’s in the buyer’s best interest to get one. A home inspection report can turn up valuable information that won’t show up on a home appraisal.
For instance, a home inspector might find:
- Problems with the foundation or structure of the home
- Roofing or flooring that needs to be repaired
- Heating, cooling, plumbing, or electrical systems that are faulty or will need to be replaced soon
- Insulation that needs replacing
- Hidden termite damage or other pest infestation
Any of these issues could cost thousands of dollars to fix. A home inspection gives the buyer a chance to negotiate repairs with the seller before they become the new owner.
Without a home inspection, the buyer will have to pay out of pocket for any repairs they discover as a new homeowner.
The lender doesn’t need to see a home inspection because it won’t have to pay for home renovations. That’s why they’re not required.
But as a buyer, you’ll want to know about any potential problems — and the likely cost to fix them — before you close on the purchase.
The only real downside of a home inspection is its cost, although home inspection fees are not astronomical.
HomeAdvisor reckons the nationwide average cost for a 2,000-square-foot home in 2020 was between $279 and $399, though bills of $500+ arose occasionally. And it suggests you add $25 for each additional 500 square feet of floor space.
For many homebuyers, that’s a small price to pay for the peace of mind such an inspection brings. Imagine spending $350 to save $10,000. That’s not an uncommon occurrence. You’ll know that the crack in an internal wall or in the foundations you noticed isn’t a sign of a serious problem. Or that it is, and you should find somewhere else to buy.
Plus, you may well be able to use your home inspection report as leverage to drive down the sale price, or to get the seller to pay for repairs before you move in.
If you do opt to get a home inspection, your first task is to pick a good inspector.
Consumer Reports (CR) suggests you start with recommendations from local friends and family. And then move onto the internet to check out your candidates.
The American Society of Home Inspectors (ASHI), the International Association of Certified Home Inspectors (InterNACHI), and the National Academy of Building Inspection Engineers are professional bodies that might help, according to CR.
A home inspection typically covers the property’s:
- Heating system
- Central air conditioning system (temperature permitting)
- Interior plumbing and electrical systems
- Roof
- Attic, including visible insulation
- Walls
- Ceilings
- Floors
- Windows and doors
- Foundation
- Basement
- Structural components
It’s important to note that home inspectors can’t check every inch of the home and won’t normally dig earth, penetrate walls and ceilings, or generally access inaccessible areas.
So be realistic about your expectations. For a few hundred bucks, you can’t expect a full demolition job to track down a leaky pipe. But you can expect its consequent damp patch to be highlighted.
It’s good to talk things through with your home inspector before and after your inspection. Beforehand, describe anything that bothers you and that you’d like checked especially carefully.
For example, suppose you noticed a crack in the brickwork of the foundations. That could be a very costly fault. Or perhaps you’re concerned the wiring is dated and may not be up to code.
You can expect them to pay particular attention to these and either provide reassurance or raise the alarm. But don’t be surprised if they suggest calling in a specialist to investigate specific issues further.
Most homes (even some new ones) will have a list of defects. So go through them with your inspector to judge how serious they are.
Should you be asking $300 off the asking price to deal with some minor quibbles? Or $30,000 to have the foundations underpinned?
Your home inspector can take a lot of the worry out of the homebuying process. Yes, you’ll still have the stress of real estate agents, loan officers, paperwork, and endless questions. But your inspector can calm your biggest fear: that you’re buying a money pit.
Conventional loan appraisal requirements
One of the main requirements for a conventional loan is that the home must be appraised. The appraiser’s job is to work out the property’s actual market value.
Usually, they do this by comparing the property with other, similar homes in the neighborhood that have sold recently.
An appraiser’s principal task is to protect the lender by making sure they’re not financing more than the home is worth. But in doing so, the appraiser protects the buyer, too.
Sellers can set asking prices at any level they want. And many ask for more than the home is truly worth on the open market.
So the appraised value protects you from paying too much for a home. And it protects the lender by assuring that it could make its money back by selling the home in the event of a foreclosure.
This protection is the reason your mortgage lender will always require an appraisal for a conventional loan.
Over the years, an experienced appraiser might acquire some knowledge of construction techniques and structural issues. If they spot a major issue with the home, they may list it in their report.
In this case, your lender might require a specialist to check out that issue. For instance, chipping paint on the exterior of an older home might trigger a note from the appraiser that area should be checked out by a lead paint specialist.
But it’s not the appraiser’s job to explore such flaw or even necessarily to report them. Their only role is to appraise the home’s value.
This means buyers should not rely on an appraiser to notice structural problems or any other defects with the home. For their own peace of mind, buyers should order an independent, third-party home inspection to make sure they’re not purchasing a surprise fixer-upper.
Do Mortgage Companies Require Home Inspections
FAQ
What does a conventional loan appraiser look for?
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