FHA Loan Well & Septic Inspections: Requirements & Process

Faulty wells and septic systems pose significant health and safety problems for homeowners and properties. Well water and septic tank inspections may be required for Federal Housing Administration loans if an FHA appraiser deems it necessary. State or local requirements and FHA lender discretion may also determine that a well or septic inspection is necessary.

FHA Guidelines Are Flexible

The FHA ultimately leaves decisions about well and septic inspections to lenders. FHA-approved lenders know the agency's guidelines for property condition and required repairs, and must use prudent underwriting when making loans for the FHA to insure. According to standards the FHA provided to its lenders and appraisers in 2005, all "observable property deficiencies" must be reported on appraisals, and lenders must use "professional judgment" to determine whether automatic inspection of a property's well or septic systems will be needed to approve a loan.

Requirements for New Constructions

Newly built homes less than one year old, with the exception of manufactured homes, face more inspection requirements for well water and septic tanks. For example, the FHA may require a well water analysis or septic tank report from the local health authority.