Termite Inspection Requirements for FHA Loans

The Federal Housing Administration has specific requirements for termite inspections when an FHA loan is being used. These requirements are outlined in HUD Handbook 4000.1, also known as the Single Family Housing Policy Handbook.

Below you’ll find a basic overview of FHA inspection requirements for termites and other wood-destroying insects. Please refer to official guidelines if you have questions, or to learn more about this subject.

Termite Inspection Requirements for FHA Loans

The main thing to know is that a full termite inspection isn’t always required on home purchases that are financed through the FHA mortgage program. Some borrowers believe that termite inspections are mandatory in all FHA loan scenarios. But that’s not the case.

Part II of the aforementioned handbook covers appraiser and property requirements for FHA home purchase loans. Among other things, it specifies what the appraiser must look for with regard to termite infestation.

Here’s a direct quote from that section of the handbook:

“The Appraiser must observe the foundation and perimeter of the buildings for evidence of wood destroying pests.”

So that tells us where the appraiser must look for termites — primarily, the foundation and perimeter of buildings. The handbook goes on to explain that it doesn’t have to be a complete and comprehensive inspection:

“The Appraiser’s observation is not required to be at the same level as a qualified pest control specialist.”

Here’s what the appraiser must do if he or she encounters signs of termites or other wood-destroying insects:

If the appraiser finds “evidence or notification of infestation, including a prior treatment,” he or she must mark the appropriate box under the “Improvements” section of the appraisal report. Another key requirement: The appraiser must then make the appraisal subject to inspection by a qualified pest control specialist.

That last part is important. It means that a professional termite / pest inspection service must be brought in to further inspect the property. But again, this is only in cases where the appraiser finds evidence of wood-destroying insects such as termites. If he or she does not encounter such evidence, then further inspection is usually not required.

What the Mortgage Lender Must Do

The HUD handbook also outlines termite-related requirements for the mortgage lender. But again, these are only in cases where the home appraiser has found evidence of an infestation and “flagged” it in the appraisal report.

Where it talks about underwriting the property, the handbook states:

“For existing Properties, the Mortgagee must confirm that the Property is free of wood destroying insects and organisms [such as termites]. If the appraisal is made subject to inspection by a qualified pest control specialist, the Mortgagee must obtain such inspection and evidence of any required treatment to confirm the Property is free of wood destroying insects and organisms.”

In other words:

If the home appraiser flags the property for having signs of a termite inspection (or other damaging insects), the property must then be inspected by a professional pest control company. The pest control specialist would then treat the home, if necessary, to remove the wood-destroying insects. The mortgage lender must then ensure that the property is free of such pests.

Those are the basic termite inspection requirements for FHA loans.

Special Requirements for New Homes

There are also some termite-related requirements for newly built homes, and these are found in a different part of the handbook.

Within the context of FHA loans, HUD defines “new construction” to include proposed construction, properties that are under construction, and properties that have existed for less than one year.

There are some termite-related documents required for “new construction” that is being financed with an FHA loan (with maximum financing). They are:

  • Wood Infestation Report. This document is typically required for most new properties, unless the home being purchased 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. This document (a.k.a., the Subterranean Termite Protection Builder’s Guarantee), is required for all new construction according to current HUD guidelines.
  • Form HUD-NPMA-99-B. This document (a.k.a., the New Construction Subterranean Termite Service Record) is typically required when the property has been treated with a soil chemical termiticide.

The handbook goes on to state that:

“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.”

Where to learn more: All of these termite inspection requirements for FHA loans can be found in HUD Handbook 4000.1. If you have any questions about them, you can send them to the Federal Housing Administration’s resource center. You can also review their list of frequently asked questions located at www.hud.gov/answers.