Looking for that perfect home for your family? Maybe an older home is more your style? Possibly looking to buy an older, fixer upper project? But, possibly just an older home better fits a certain price range. If either of these scenarios fit your home shopping trip, you need to understand potential lead paint hazards. Additionally, using an FHA loan to buy a home built pre-1978 involves an FHA lead based paint disclosure. Even though it is important to understand lead paint risks, it doesn’t mean older homes should be totally off limits. Just realize there will be extra steps in the FHA loan process including disclosures, appraisal notification, and possibly some repairs.
Image source: https://www.epa.gov/lead/protect-your-family-exposures-lead
What Are the Risks of Lead Paint?
Lead dust or continued exposure to lead has been known to cause health problems. This is especially true with children. By 1978, all states had banned using lead paint because of lead paint poisoning possibilities. Although, that doesn’t mean all lead paint was wiped away. Most, if not all lead paint that exists today has been painted over in the last 40 years. Therefore, the risk of lead paint exposure chances are low since it is covered up by new layers of paint. However, even if the top layer of paint starts peeling, the lead paint could be exposed again.
Once there are signs of peeling paint on the house, that is when appraisers, inspectors, and lenders are going to point out “potential” lead paint risks. As we will discuss in a moment, it will need to be remedied.
Not only is lead found in paint, but it could also be present where leaded gas has seeped into the soil, toys made with lead paint, drinking water (learn about well water testing), and more.
FHA Lead Based Paint Disclosure
Choosing to finance a home with an FHA loan comes with a lot of benefits such as low interest rates and flexible qualification characteristics such as:
- Low down payment
- Debt to income ratios
- Credit scores
- Seller paid closing costs
- Gift of equity
- Down payment gift allowed
- Co borrower does not have to live in the house
- Allows down payment assistance
- Renovation option
- Fixed interest rates
Also, the Federal Housing Administration (FHA), FHA lenders, and FHA appraisers care about safety for occupants. By clicking the link below and reviewing the FHA lead based paint disclosure, the warning is clear. As notated, “Intact lead-based paint that is in good condition is not necessarily a hazard.” If lead paint is exposed, the document explains the potential risks, especially for children and pregnant women.
Seller Requirement on FHA Lead Based Paint Disclosure
Notice on the disclosure, sellers must state if the presence of lead is known. Furthermore, if any known reports or documentation exist, then the seller must notate such and list them. Finally, if the seller has no knowledge of reports or records pertaining to the presence of lead, there is a box to check.
Buyer Acknowledgement of FHA Lead Based Paint Disclosure
On this required form, the buyers must make acknowledgments as well. These acknowledgments from buyers are that:
- Has received copies of any provided documentation
- Received the pamphlet called “Protect your family from lead in your home”
- Either had the opportunity to conduct an inspection for lead paint hazards or chooses to waive it
This is also a time that buyers should really educate themselves by reading the above pamphlet. All real estate agents will provide this disclosure when it applies and will explain it as well.
FHA Lead Based Paint Appraisal Requirements
Another part of the purchase process that is looking for lead based paint hazards is the appraisal process. Not only is the appraiser looking for lead paint issues, but also any other hazards as well. Examples of other safety issues of concern to FHA appraisers include electrical, tripping, instability, or other issues. Primarily, an appraiser is looking for peeling paint anywhere on homes built prior to 1978.
If there is any peeling paint present, an appraiser will notate it on the appraisal. Thus, the report will be considered “subject to repairs”. Therefore, prior to closing FHA lenders require correction of the issue. Don’t worry, all the lead paint does not have to be removed. Typically, this means someone needs to safely scrape the peeling paint and then repaint the areas. Of course, with today’s paint which does not have lead in it. No one should tackle this without protective equipment and it is best left to an experienced professional.
In a case where the FHA appraisal requires correcting the issue, it is possible for an escrow repair holdback so that the painting may be completed after closing. Additionally, a renovation loan could allow this and many other home improvements to be completed after the loan. Even better, a renovation loan could finance the renovations. OVM Financial offers FHA 203k loans, HomeStyle Renovation, and VA Renovation loans.
Do you have questions about FHA lead based paint requirements or have an issue with an FHA loan? Contact OVM Financial now.