Home inspection: what it covers and when to get it

This guide is for you if you are about to make an offer on a home or your offer was just accepted. It explains what an inspection is, how it differs from the appraisal, when to get it so your contract protects you, what to know about radon and lead, and what to do with the report.

For a lead inspection in homes built before 1978, unless another period is agreed in writing

10 days¹¹

Radon level at which the EPA recommends fixing the home

4 pCi/L⁸

Before closing, at the latest, you must get your copy of the appraisal

3 days⁷

Homes covered by the federal lead disclosure rules

Before 1978⁹

What a home inspection is

A home inspectionhome inspectionA home inspection is a review of the property's physical condition by an inspector before you finish buying: roof, foundation, plumbing, electrical, heating and cooling, signs of moisture or pests. It is often part of the home buying process and you pay for it, not the lender; unlike the appraisal, it does not say what the home is worth but what problems it has. With the report you can ask for repairs, negotiate the price or walk away if your contract includes an inspection contingency. Some assistance programs require one.See the full definitionClose is a check of the physical condition of the home you want to buy. According to FHA, its purpose is to inform you about the property before you make a financial commitment. For a fee, a qualified inspector takes an unbiased look at the home, estimates the remaining useful life of the major systems, equipment, structure and finishes, and identifies what needs to be repaired or replaced.¹

It only happens if you arrange for one, because FHA does not perform home inspections.¹ As the CFPB puts it, the inspector works for you and should tell you whether the home is in good condition or whether you are buying a “money pit” of expensive repairs.⁶

If you apply for an FHA loanFHA loanAn FHA loan is a mortgage made by a private lender and insured by the Federal Housing Administration (FHA), an agency of the U.S. government. That insurance protects the lender if you stop paying, which is why the lender can accept a lower down payment and a less-than-perfect credit history than on a conventional loan. Federal law sets the minimum cash investment at 3.5% of the property's value and caps the loan amount at the FHA limit, which changes by county. In exchange for the insurance you pay a mortgage insurance premium.See the full definitionClose, you will see that explanation in writing: the lender has to give you the “For Your Protection: Get a Home Inspection” sheet (form HUD-92564-CN) at first contact, whether for prequalification, preapproval or the application.³ Read it calmly: it is short and covers the essentials.

An inspection is not an appraisal

FHA’s buyer sheet says it in capital letters: appraisals are NOT home inspections. The appraisalhome appraisalAn appraisal is a written document that gives a professional appraiser's opinion of how much a property is worth. The lender orders it before approving the mortgage, because the home is the loan's collateral and the lender does not want to lend more than it is worth. If the appraisal comes in below the price you agreed, the bank bases the loan on the lower value and you will have to cover the difference, renegotiate the price or walk away if your contract allows it. An appraisal is not an inspection: it measures value, not the home's condition.See the full definitionClose is required to estimate the home’s value for your lenderlenderThe lender is the financial institution that lends you the money for your mortgage. The mortgage is the agreement that gives the lender the right to take your home if you do not repay what it lent you. After closing, it is common for another company, the loan servicer, to collect your payments and keep track of the loan; it may be the same company that lent you the money or a different one. On the Loan Estimate, the lender's name appears on the first page, and the last page lists it as "Lender" with its NMLS or license number.See the full definitionClose and does not replace an inspection.¹

Inspection and appraisal, side by side

For you

Home inspection

• The inspector works for you.⁶
• It answers what condition the home is in and what needs repair or replacement.¹
• You arrange it: if you do not, it does not happen.¹
• Before hiring, you can ask for a sample report.¹

For the lender

Appraisal

• It gives the lender an estimate of the home's market value.⁶
• It is a written document with an opinion of what the property is worth.⁷
• The lender orders it, and generally requires one when you borrow to buy.²
• You get a copy no later than three days before closing, and you can't be charged for it.⁷

They are different, but you generally need both.²

FHA does not guarantee the value or condition of your home. If you find problems after closingclosingClosing, also called settlement, is the last step in buying and financing a home: the moment when you and the other parties sign the necessary documents. Once you sign, you are responsible for repaying the mortgage. The lender sends the loan money to the settlement agent, who pays the seller and distributes the closing costs; the seller signs the deed that makes you the owner, and the documents are recorded with the county. Depending on the state, everyone signs together at a table or signatures are collected separately, sometimes online. Before you sign, read everything and ask about anything you do not understand.See the full definitionClose, FHA cannot give or lend you money for repairs, and cannot buy the home back from you.¹

If the appraisal comes in below the price. The CFPB says it is very risky to buy a home for more than its appraised value, and that lenders are not allowed to interfere with the appraiser’s judgment. First, get your copy. With a low appraisal, you can often negotiate a lower price with the seller. If the seller will not lower it, you may consider canceling the purchase, although depending on your contract there may be costs.⁴

When to get it: the inspection contingency

The CFPB places the inspection in the closing phase: after the seller has accepted your purchase offerpurchase offerA purchase offer is the formal proposal you make to a seller to buy their home. Your real estate agent writes it up and sends it to the seller's agent. It includes the price you offer and the terms of the purchase: your target closing date, who pays certain fees, a deadline for the seller to respond and any contingencies, which are conditions that must be met before you buy. The seller can accept it or answer with a counteroffer, and you can accept, reject or counter again. Once both parties sign the written offer, it becomes a contract.See the full definitionClose and you have chosen a loan and a lender.⁵ Its advice is to schedule it as soon as you have chosen the home: to learn early whether there are major problems and decide whether you still want to buy, and to leave time for any additional inspections.²

This is where a contingencycontingencyA contingency is a condition you add to your offer or purchase contract to protect yourself: if it is not met, you can change or end the contract and, in general, get your earnest money back. The most common are the inspection contingency, if the inspection finds problems; the appraisal contingency, if the appraisal comes in below the price; the financing or mortgage contingency, if you cannot get the loan within the agreed time; and the home sale contingency, tied to selling your current home. Contingencies are a normal part of buying, but too many can make your offer less attractive to the seller.See the full definitionClose comes in, a condition in your offer or contract. According to FHA, if you request the inspection early, you may be able to make your purchase contract contingent on its results.¹ The CFPB explains why that matters: if your contract is contingent on a satisfactory inspection and you are not satisfied with the results, you have the right to cancel the sale without penalty.²

Where the inspection fits in your purchase

1. 1. You talk with a lender

   Prequalification, preapproval or application

   If it is an FHA loan, you get the HUD sheet that explains what the inspection is for.³

2. 2. You make your offer

   Before you sign the contract

   If you request the inspection early, you may be able to make the contract contingent on its results.¹

3. 3. You schedule the inspection

   As soon as your offer is accepted

   As early as possible, so you have time to resolve problems or get other inspections.²

4. 4. You choose the inspector

   Before the appointment

   Ask prior customers for references and look the inspector up with the BBB and the licensing authority.²

5. 5. You attend the inspection

   On the day

   Being there helps you understand the report and ask questions.²

6. 6. Lead testing in homes built before 1978

   10 days, unless another period is agreed in writing

   The seller must give you that period for a lead inspection or risk assessment.¹¹

7. 7. You read the report and decide

   Within your contingency period

   Negotiate repairs or a credit, or cancel without penalty if your contract depends on the inspection.²

8. 8. You get your copy of the appraisal

   No later than 3 days before closing

   You have a right to that copy, and you can't be charged for it.⁷

How to choose an inspector

To know what their inspection includes before you hire someone, FHA suggests asking the inspector for their Standards of Practice or a sample inspection report.¹ To find one:

• Ask for references. FHA suggests asking friends, real estate professionals, local licensing authorities and organizations that qualify and test home inspectors.¹ The CFPB adds: ask for references from prior customers.²
• Check their history. Depending on your area, home inspectors may not be required to be licensed, so the rule changes from place to place. Look the inspector up with your local Better Business Bureau (BBB) and your state or county licensing authority. The CFPB recommends one with a reputation for being honest and thorough.²
• Go to the inspection. If you can be there, it is easier to understand the report and the issues, and to ask questions.²

Radon and lead: separate tests

Beyond the general inspection, FHA suggests asking your inspector whether other health and safety tests make sense for your home: mold, air or water quality, asbestos, lead paint, urea formaldehyde insulation or pests. For radon questions, the same sheet lists the toll-free National Radon Information Line: 1-800-SOS-Radon (1-800-767-7236).¹ Two of these have their own federal guidance or rules.

Radon. You cannot see, smell or taste it, but breathing it raises your risk of lung cancer. Any home can have it, and testing is the only way to know your home’s level: neighboring homes are not a guide. The EPA recommends testing if you are buying or selling a home, and fixing the home if the level is 4 picocuries per liter (pCi/L) or higher.⁸

If the home has not been tested, the EPA recommends testing as soon as possible and considering contract terms on how the test will be done, how results and costs are shared, and who pays if the level must be lowered. If the seller already has a test, you can accept it or ask for a new one. You can ask your state radon office for its approved list of testing companies; many states require a license, certification or registration.⁸

Lead in homes built before 1978. The federal lead-based paint rules cover most housing built before 1978.⁹¹³ Before you are bound by the contract, the seller must:

1. Give you an EPA-approved pamphlet, such as “Protect Your Family From Lead in Your Home.”¹⁰
2. Tell you about any known lead-based paint or lead hazards in the home, and give you any records or reports they have.¹⁰
3. Give you 10 days for a lead inspection or risk assessment, unless you agree in writing on a different period. You can waive those days, but only in writing.¹¹

The contract must include an attachment, in the language of the contract, with a warning that recommends a lead assessment or inspection before purchase and your statement that you had the opportunity or waived it.¹² This rule does not require the seller to test on their own.¹⁰ The rule does not apply to foreclosure sales, for example, and the EPA has a Lead-Based Paint Professional Locator for certified lead inspectors.¹³

What to do with the report

With the report in hand, the CFPB describes several paths: negotiating with the seller, asking for a credit or, if there are serious flaws, deciding not to buy.² Here is how they look with example findings:

Example with real numbers

Report findings and what you can do

An example in words, using the paths the CFPB and the EPA describe.

Damaged or worn-out parts

Ask the seller to fix them before you move in, or to give you a credit for the cost²

Repairs someone has to pay for

Negotiate who makes or pays for them; depending on your contract and the local market, the seller may or may not agree²

A serious flaw, such as a cracked foundation

Decide not to buy; if your contract is contingent on a satisfactory inspection, cancel without penalty²

Radon at 4 pCi/L or higher

The EPA recommends fixing the home and considering contract terms on who pays for those measures⁸⁸

This is an example: what your inspector finds and what your contract says decide your options.

Run it with your numbersClosing costs

Decide before closing: if you find problems afterward, FHA cannot give you money for repairs or buy the home back.¹

A seller credit changes your numbers: the closing costs calculator estimates the cash you need to close, and the closing costs guide explains those credits. To sort out your options, a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose gives independent advice, often free or at low cost.¹⁴

If this is you

You are buying for the first time

The inspector works for you: get the inspection before you are finally committed to buy.⁶ The step-by-step home buying guide shows where it fits in the process.

You have young children and the home was built before 1978

You have 10 days for a lead inspection, unless another period is agreed in writing.¹¹ The EPA has a locator for certified lead inspectors.¹³

Your contract is in Spanish

The lead attachment must be in the language of the contract, for example Spanish.¹² If you attend the inspection, you can ask your questions on the spot.²

You are worried about paying for repairs

You can negotiate for the seller to make them or give you a credit.² A HUD-approved housing counselor can help with your numbers, often free or at low cost.¹⁴

Mistakes and red flags

• Mistake: Skipping the inspection because the appraisal “already checked the house.”

  Instead: The appraisal is for the lender and does not replace an inspection: arrange one yourself.¹

• Mistake: Assuming a home that looks fine does not need an inspection.

  Instead: The CFPB says not to buy without a thorough inspection: it is for your protection.²

• Mistake: Hiring the first inspector someone recommends.

  Instead: Ask for references and look them up with the BBB and your state or county licensing authority.²

• Mistake: Dropping the inspection contingency so your offer “wins.”

  Instead: Without that condition you can lose the penalty-free exit if the report goes badly.²

• Mistake: Accepting the seller's radon test without asking anything.

  Instead: Ask who did it, where in the home and what has changed since, including the heating and air system (HVAC).⁸

• Mistake: Leaving repairs until after closing.

  Instead: Negotiate first: afterward, FHA cannot give you money for repairs or buy the home back.¹

One more red flag: a pre-1978 home with no lead paperwork. The EPA says anyone who fails to give that information may be subject to penalties, and you can report it at epa.gov/lead/violation.¹³

What to do this week

1. If you have not made an offer yet, ask how to include an inspection contingency and read the conditions it sets.¹
2. Ask several inspectors for their Standards of Practice or a sample report, and check their license (if your area requires one), references and the BBB.¹²
3. Schedule the inspection as soon as your offer is accepted, and attend if you can.²²
4. Ask the seller for any radon results; if there are none, ask for a test and write into the contract who pays for it.⁸
5. If the home was built before 1978, confirm you received the pamphlet, the lead disclosure and your 10 days to inspect.¹¹
6. With the report, decide whether to negotiate repairs or a credit, or to cancel under the contingency.²