Does FHA Require Connection To Public Water And Sewer?
A question that seems to be coming up a lot recently is whether FHA requires that a home with an FHA mortgage be hooked up to public water and public sewer systems when they are available. Usually, this question comes up at the last minute as an emergency situation because an FHA appraiser has checked on the appraisal that these systems are available but the home has not been hooked up to them.
FHA requires connection to public water and/or sewer “when feasible”.
The question then becomes, “How does FHA define ‘feasible’?”
The answers to these questions are found in the HUD Single Family Housing HOC Reference Guide.
In Chapter 1-21 Individual Water Systems, HUD states that
B: Individual water supply systems (wells) may be acceptable when the cost to connect to a public or community water system is not reasonable as defined by the lender. 3% or less of the estimated value of the property is the suggested benchmark.(emphasis added.)
C: The lender is responsible for determining if connection is feasible.
D: When required, the lender is to ensure that certifications of water quality and quantity are obtained for proper processing and determination of final acceptability.“
In Chapter 1-20B Individual Sewage Systems, HUD states that:
“1. Individual sewage systems may be acceptable when the cost to connect to a public or community sewage system is not reasonable as defined by the lender.
a) 3% or less of the estimated value of the property is the suggested benchmark.
b) The lender is responsible for determining if connection is feasible.
2. If the property cannot be connected to a public system, FHA will accept individual sewage systems that are acceptable to the local health authorities. This includes numerous types of sewage systems including cesspools, individual pit privies, and mound systems.
3. Inspection and/or testing is not automatically required, but is required when such actions are customary in the area, when the appraiser suspects a problem with the system, or problems are common in the area. In these instances, the appraiser is to condition for a certification by a professional such as the local health authority, a licensed sanitarian or an individual determined to be qualified by the DE Underwriter.
a) FHA does not require the lender to submit evidence or documentation in the case binder that the state or local jurisdiction requires a test or inspection.
Hooking existing homes into public water and sewer systems is often a very expensive proposition. Don’t get upset at the lender when they start asking the questions necessary to determine the feasibility of these hook ups. Be prepared with the right answers and this will not cause a serious delay in closing a sale.