Purchasing a new home is one of life’s biggest milestones. As exciting as it may be, the home buying process can also feel overwhelming for first-time buyers. With so many details to keep track of, it’s normal to have questions about what exactly is required when getting a mortgage. One common question is: do conventional loans require a home inspection?
The quick answer is no. Unlike FHA or VA loans, conventional loans do not mandate a professional inspection of the property. However that doesn’t mean you should skip this important step. Here’s what you need to know about home inspections and conventional mortgages.
What is a Conventional Loan?
First, let’s cover the basics. A conventional loan is a mortgage that conforms to guidelines set by Fannie Mae and Freddie Mac. These government-sponsored enterprises buy loans from lenders and allow them to free up capital to issue new mortgages.
Conventional loans differ from government-backed mortgages like FHA and VA loans that come with specific federal requirements. They also have lower down payment options and looser credit score requirements than conventional mortgages.
Within conventional loans, there are:
-
Conforming loans – Follow Fannie and Freddie guidelines with loan limits up to $726,200 as of 2023 Make up the bulk of conventional mortgages.
-
Non-conforming loans – Also called jumbo loans, they exceed conforming loan limits and have different requirements
-
Conventional 97 – A 3% down mortgage option for first-time buyers.
The majority of conventional mortgages are conforming loans with a minimum down payment of 5% for primary residences. Credit score and debt-to-income requirements also apply.
Are Home Inspections Required for Conventional Loans?
Unlike some government-backed mortgages, conventional loans do not mandate a professional home inspection. Many first-time home buyers wonder, “Do conventional loans require a home inspection?” But the answer is no across the board.
Lenders ultimately want to ensure the property’s value supports the loan amount through an appraisal. Protecting the buyer is not their main goal.
However, just because it’s not required doesn’t mean skipping a home inspection is wise. Here are key reasons every buyer should get an inspection:
-
Find hidden issues – Inspectors can uncover problems not visible to the untrained eye. This allows you to negotiate repairs or the price.
-
Make informed decisions – Inspection reports provide critical information to make smart choices about your new home.
-
Plan expenses – Learn about upcoming maintenance and repairs for budgeting.
-
Protect your investment – Potential safety issues or hazards can be addressed before move-in.
Even though home inspections aren’t mandated, they are absolutely vital for making the best decision for your home purchase.
Conventional Loan Home Appraisal Requirements
In contrast to home inspections, a home appraisal is required by lenders for a conventional mortgage. An appraiser’s role is to evaluate the property’s market value so the purchase price aligns.
Appraisers focus on:
- Location
- Condition
- Size
- Features
- Recent sales of comparable homes
They provide an unbiased estimate of the current value. Appraisals protect lenders by ensuring the loan amount accurately reflects the property’s worth. It also prevents buyers from overpaying.
If the appraisal value is lower than your offer, you may have to renegotiate, bring more cash to closing, or look for another property. The lender will not finance more than the appraised value.
Key Differences: Inspections vs. Appraisals
It’s easy to confuse the two, so let’s recap the main differences:
Home Inspection
- For the buyer’s benefit
- Checks condition of home’s systems and structure
- Identifies issues that may need repairs
- No valuation
Home Appraisal
- Required by the lender
- Estimates market value of the property
- Compares to recent sales of similar homes
- Ensures loan amount is supported by value
While appraisals are mandatory, inspections provide further protection and information to the buyer. Consider both as invaluable parts of your home buying due diligence.
What’s Checked During a Home Inspection?
Home inspections provide a comprehensive analysis of the property’s condition. While scopes can vary, inspectors typically examine:
- Foundation
- Framing
- Roof
- Attic
- Electrical systems
- Plumbing
- HVAC
- Appliances
- Pest activity
- Overall structural soundness and safety
Reputable inspectors follow industry standards and use specialized tools and methods for the most thorough evaluation. They will also inspect any areas of concern you specifically request.
Inspection reports summarize the findings and may include repair cost estimates. Significant defects could affect your decision to move forward with the purchase.
Red Flags That Warrant an In-Depth Inspection
Some issues may justify calling in additional specialized inspectors before closing on a conventional loan:
-
Cracks or shifting – Issues with foundations or masonry could indicate structural problems. Further evaluation by an engineer may be needed.
-
Moisture – Signs of excessive moisture, leaks, or humidity may require a professional assessment to check for mold, pests, or potential damages.
-
Faulty systems – If the HVAC, electrical, or plumbing systems show signs of defects, a specialist should inspect further.
-
Pests – Any evidence of termites, carpenter ants, or other pests necessitates an inspection and possible treatment plan.
-
Renovations – If major updates like room additions were done, confirm proper permits were obtained and work was done to code.
Your general home inspector can help identify potential red flags like these that call for a deeper dive.
Can You Get a Conventional Loan Without an Inspection?
Technically, yes. Again, conventional mortgages themselves do not list a home inspection as a mandatory requirement. However, accepting a property as-is comes with serious risks.
Waiving the due diligence of an inspection means you may be taking on significant, unexpected expenses and headaches after moving in. Hidden defects could even make the home unsafe or uninhabitable.
Most real estate agents will require a signed waiver stating you opted out of an inspection if you choose to forego one. This is because they want to protect themselves from potential lawsuits down the line.
Bottom line: just because you can buy without an inspection doesn’t mean you should.
Partnering With the Right Home Inspector
Not all home inspectors are created equal. Take time to find one who:
- Has extensive experience inspecting homes in your area
- Holds certifications from reputable organizations like InterNACHI
- Provides sample reports to evaluate thoroughness
- Explains what’s included in the inspection scope
- Is insured and licensed in your state
- Has overwhelmingly positive customer reviews
A quality inspector takes the time to explain their process and findings to you. They are familiar with common issues in local homes and use the latest tools and methods. Their reports are clear, detailed, and helpful.
Skimping on your home inspector could cost you big time down the road. Do your research to find someone you can trust.
Inspections Provide Peace of Mind
At the end of the day, a conventional loan home inspection is about gaining peace of mind and protecting your investment. Though not legally mandatory, an inspection gives you the knowledge needed to make an informed decision on the biggest purchase of your life.
Why gamble with thousands of dollars in unknown repairs when you can identify issues upfront? Arm yourself with information by partnering with a professional, reputable home inspector.
Understanding a property inside and out before signing the dotted line brings priceless value. Though optional, home inspections are an essential step no prudent buyer should skip.
Conventional vs government loan requirements
Below we describe home condition requirements for conforming mortgage loans.
Remember, ‘conforming loans’ are a type of conventional mortgage that follow guidelines set by Fannie Mae and Freddie Mac. These loan programs are not backed by the federal government.
Government loan programs, including FHA loans, VA loans, and USDA loans, enforce their own home condition requirements.
In addition, rules for non-conforming conventional mortgages — like a jumbo loan — may be slightly different.
But the following home requirements will apply to the majority of conventional mortgages.
What are conventional loan home requirements?
We spend a lot of time thinking about mortgage lenders’ requirements for borrowers: whether you personally qualify for a loan.
But the home you want to buy must also qualify. The lender wants to know it’s making a sound investment.
Here’s what you should know about conventional loan home requirements if you hope to qualify for a conventional mortgage.
In this article (Skip to…)
Do Mortgage Companies Require Home Inspections
FAQ
What type of inspection is required for a conventional loan?
What does a conventional loan appraiser look for?
What will fail a conventional appraisal?
Which type of home is most often ineligible for conventional financing?
Do you need a home inspection for a conventional loan?
No, a professional home inspection is not required to obtain a conventional loan. But buying a home without a home inspection can be a big mistake. Your real estate agent may require you to sign a home inspection waiver if you decide to skip the home inspection.
Do you need a home inspection for a mortgage?
Generally speaking, home inspections are optional. They’re typically not required for mortgage loans. That means buyers can choose whether or not they want to request one. FHA and VA loans are a little different. Technically speaking, neither the FHA or VA requires a standard home inspection.
What are the requirements for a conventional loan?
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.
Do you need a home inspection if you have a VA loan?
The Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) do not require borrowers to have a home inspection. But they do require appraisals. With a regular mortgage loan — i.e., one that is not backed by the government — the home appraisal determines the current market value of the property.