How Does FHA Look at Garage Conversions & Other Unpermitted Additions?

If a home has something about it that is different to it’s original structure, you may have a problem getting an FHA loan on it. What’s an FHA Underwriter going to do?

Typically the Underwriter is going to
(i) Ask for confirmation from the Appraiser that the work was done in a workmanlike manner i.e it doesn’t pose a hazard of some sort
(ii) Make sure the Appraiser has not used that living space in this final value determination.
Make sure the Appraiser mentions whether the current use is in compliance with the zoning ordinances. Appraiser has to mark the box indicating whether it is a Legal, Legal Non-Conforming (Grandfathered Use), No Zoning, or an Illegal Use.
“If the existing property does not comply with all of the current zoning regulations (use, lot size, improvement size, off street parking, etc.) but is accepted by the local zoning authority, enter “Legal Non-Conforming” and provide a brief explanation. If the use is not legal, the property is not eligible for FHA mortgage insurance.” Here is a link to HUD/FHA rule…02appdHSGH.pdf
(iii) check If work has to be done to restore the property to a safe/original condition, what’s the “cost to cure” the defect? An Appraiser has to estimate this and sometimes there might be a need for a full blown Contractor bid in writing.

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