Bonanza for House Inspectors from FHA Loans
House inspectors are having a blast from the rising number of home buyers needing home inspections for their application for mortgage loan insurance with the Federal Housing Administration.
Ever since FHA raised its loan limits to $729,000, the number of loans backed by FHA has increased from only 3 percent of all mortgages in 2007 to about one-third this year, based on data from Inside Mortgage Finance.
House inspectors get a lot of jobs from homeowners applying for FHA insurance because FHA is much stricter than other mortgage insurers in its requirements on the conditions of the homes to be insured.
According to house inspectors experienced in FHA house inspection, the FHA rejects applications for houses with exposed electric wires, leaking roof and defective major appliances. FHA requires the houses it backs to be livable.
John Taylor, owner of Acquired Home Services in Gainesville, is one of several house inspectors benefiting from the house inspection boom. He has hired more people, bringing his total staff to 28.
Taylor said his house inspectors are making money from the FHA home renovation product called 203(k). The loan product adds costs of repairs and improvements to the mortgage loan. If the foreclosed property being financed is unlivable, FHA includes up to 6 months of loan payments in the total mortgage so the borrower does not have to suffer from paying both the loan and the rent.
In March, Taylor and his house inspectors completed 41 FHA home renovation inspections. Since the improvements of FHA loans products, 20 percent of Taylor’s home inspection activities have been 203(k) inspections.
Taylor charges around $400 for regular house inspections and charges between $600 to $1,000 for 203(k) inspections. He said most of the homes his house inspectors are checking are priced between $300,000 to $350,000.
Another home inspection business benefiting from the boom is Ed Williams, owner of HomeSure Inspections in Maryland. Williams said he had eight house inspectors in 2003, but they left one by one as house inspection slowed down. Now, he says, his house inspection business has been restored by about 30 percent since the flood of foreclosures began.
Taylor expects that the boom lasts for several more years, as the last home inspection boom lasted for over 5 years — from 1996 to 2001.
