Do Lenders Require a Home Inspection for Mortgage Approval?
Do Lenders Require a Home Inspection for Mortgage Approval?
Securing home financing can feel overwhelming. Lenders ask for a lot of information not only about you, but the property, as well. It’s their job to make sure the collateral is worth what you’re paying so they don’t get in over their heads if you default.
One question that comes up often is whether lenders require a home inspection.
The short answer is: ‘they don’t.’ Here’s why…
Why Lenders Don’t Require a Home Inspection
Lenders usually don’t require a home inspection because the home appraisal tells them what they need to know. The appraisal tells the lender a home’s market value. In other words, if they had to take possession of the home and sell it because you stopped making your payments, would they make enough money?
That’s what lenders care about.
This, however, doesn’t mean you shouldn’t get an inspection.
Reasons you Should Consider a Home Inspection
You might think since lenders don’t require a home inspection that you should skip it. DO NOT skip it!
Yes, it’s another expense, but $300 – $500 is a lot better than losing hundreds of thousands of dollars if you find out AFTER you buy the home that it has major issues.
Here are some key reasons to consider a home inspection.
Get a good perspective on the home’s condition – An appraisal looks at the ‘big stuff’ but doesn’t get down to the details. An inspector will tell you what’s wrong with the home and what its effects could be.
Learn about mold problems early – Mold can be detrimental to your home and your health. If it’s hidden, it won’t get exposed until you own the home and its growth causes issues. An inspector, however, will catch it right away and advise you on how to proceed.
Know everything that’s wrong with the home – Sometimes we don’t want to hear the negatives, but knowing a home’s roof only has a couple of years or the electrical is out of code is something you’d likely want to know before buying a home.
A home inspection isn’t meant to turn you away from a home. It’s meant to empower your decision. What if there are issues you don’t want to deal with, such as mold growth or an electrical problem? What if there’s water damage or problems with the air ducts?
The lengthy inspection report you get can seem overwhelming, but it will come in handy not only to help in your purchase decision, but also if/when you own the home. You can refer back to the report, seeing what was wrong when you bought it to give you insight into what maintenance or repairs the home may need sooner rather than later.
Final Thoughts
Most lenders (me included) strongly recommend a home inspection. I personally cannot imagine not getting one done! Consider it an investment rather than an expense. You’re investing in the financial future of owning the home. If it’s a bad financial decision, you’ll know right away and you’ll only be out $300 – $500 instead of hundreds of thousands of dollars!