What are the inspection and documentation requirements for Site Built and Condominium new construction to obtain maximum FHA financing?

The following guidance may be used immediately for existing cases and must be used for FHA case numbers assigned on or after January 4, 2021.
 
For new construction financing, the Mortgagee must obtain the following requirements for Site Built Housing and Condominium units (by Construction Status at time at appraisal):

Inspection Requirements:

   Proposed Construction:

  • copies of the building permit (or equivalent) and Certificate of Occupancy (CO) (or equivalent); or
  • three inspections (footing, framing and final) performed by the local authority with jurisdiction over the Property or an International Code Council (ICC) certified Residential Combination Inspector (RCI) or Combination Inspector (CI) (for Modular Housing, footing and final only); or
  • in the absence of such ICC certified RCI or CI, the Mortgagee may obtain three inspections (footing, framing and final) performed by a disinterested third-party, who is a registered architect or a structural engineer and has met the licensing and bonding requirements of the State in which the property is located.
     
   Under Construction:                 
  • copies of the building permit (or equivalent) and CO (or equivalent); or
  • a final inspection issued by the local authority with jurisdiction over the Property or by an ICC certified RCI or CI; or
  • in the absence of such ICC certified RCI or CI, the Mortgagee may obtain a final inspection performed by a disinterested third-party, who is a registered architect or a structural engineer and has met the licensing and bonding requirements of the State in which the property is located.
 
   Existing for Less than One Year:
  • copies of the CO (or equivalent); or
  • a final inspection issued by the local authority with jurisdiction over the Property or by an ICC certified RCI or CI; or
  • in the absence of such ICC certified RCI or CI, the Mortgagee may obtain a final inspection performed by a disinterested third-party, who is a registered architect or a structural engineer and has met the licensing and bonding requirements of the State in which the property is located.

Required Case Binder Documentation:
FHA requires the submission and retention of the following documents in the case binder for all new constructions:
  • form HUD-92541, Builder’s Certification of Plans, Specifications and Site;
  • form HUD-92544, Warranty of Completion of Construction;
  • required inspections, as applicable;
  • Inspections performed by ICC certified RCI or CI or a third-party, who is a registered architect or structural engineer must be reported on form HUD-92051, Compliance Inspection Report (CIR) or on an appropriate State sanctioned inspection form.
  • Wood Infestation Report, unless the Property is located in an area of no to slight infestation as indicated on HUD’s “Termite Treatment Exception Areas” list:
    • Form HUD-NPMA-99-A, Subterranean Termite Protection Builder’s Guarantee, is required for all New Construction. If the building is constructed with steel, masonry or concrete building components with only minor interior wood trim and roof sheathing, no treatment is needed. The Mortgagee must ensure that the builder notes on the form that the construction is masonry, steel, or concrete.
    • Form HUD-NPMA-99-B, New Construction Subterranean Termite Service Record, is required when the New Construction Property is treated with one of the following: Termite Bait System, Field Applied Wood Treatment, soil chemical termiticide, or Physical Barrier System is installed, as reflected on the HUD-NPMA-99-A. The Mortgagee must reject the use of post construction soil treatment when the termiticide is applied only around the perimeter of the foundation.
  • Local Health Authority well water analysis and/or septic report, where required by the local jurisdictional authority.
  • When a third-party, who is a registered architect or structural engineer, is relied upon for required inspections due to the absence if ICC certified RCI or CI, include certification from such inspector that they are licensed and bonded under applicable state and local laws.
 
Note: The requirements for Manufactured Housing new construction properties may differ and are located in Handbook 4000.1 II.A.8.i.iii(B) and Mortgagee Letter 2020-36.

For additional information see:

 

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04431