Are Well And Septic Inspections Needed To Get A Mortgage?

March 22nd, 2022

septic truck

Well and septic inspections may indeed be required to get mortgage approval. But it depends on the type of mortgage you are seeking.

A conventional mortgage through Fannie Mae or Freddie Mac typically do not require  well and septic inspections. I say “typically” not required because there may be an instance where they are required.

Fannie Mae requires the lender to disclose any information regarding environmental hazards. A lender is required to get the necessary inspections if the appraiser, real estate broker, property seller, property purchaser, or any other party to the mortgage transaction informs the lender that an environmental hazard exists in or on the property, or in the vicinity of the property. Fannie Mae also requires the lender to disclose such information to the borrower and comply with any state or local environmental laws regarding disclosure.

So if you’re buying a home that is on a well and/or septic systems and  it comes to the attention of the lender through the appraiser or any other party, inspections will be needed on those systems to get the loan approved. If there is no visible issue and nobody reports a problem, which is typical, then no well and/or septic inspection would be required.

For more details on this issue as it relates to Conventional loans, click here B4-1.4-08, Environmental Hazards Appraisal Requirements.

However, with FHA and VA loans, a well and septic inspection is always required, regardless of the visible condition of these systems. If an inspection doesn’t pass the local guidelines and requirements, remediation will be needed until the systems pass. And an FHA or VA mortgage loan will not be able to close until the inspections pass.

With an FHA loan, the FHA Appraiser must check for issues or malfunction if the property has a septic system. If there are visible deficiencies, the FHA appraiser must require repair or further inspection. And the FHA guidelines also require the lender to get a septic system inspection. Hence, it is important to note regardless of what the FHA appraiser finds, the lender is going to require an inspection of the septic system. The same holds if the home has a well water system.

For further FHA guidelines click on this link, and start reading at the bottom of page 170 from “Requirements for Well Water Testing” for all the details. You will see other interesting details such as:

  • The septic tank must be 50 feet from the water supply on existing construction.
  • The septic tank must be preferably 100 feet from the water supply on new construction.
  • Existing wells must deliver water flow of three to five gallons per minute for existing construction.
  • Wells must deliver water flow of five gallons per minute over at least a four-hour period for new construction.

For further VA guidelines click on this link and look for page 12–20 and start reading from “15. Water Supply and Sanitary Facilities”.

You will see information on things such as:

  • All testing must be performed by a disinterested third party.
  • Water quality for an individual water supply must meet the requirements of the health authority having jurisdiction. If the local authority does not have specific requirements, the guidelines established by the Environmental Protection Agency (EPA) will apply.
  • The appraiser must be familiar with the minimum distance requirements between private wells and sources of pollution.
  • Water quality test results are valid for 90 days from the date certified by the local health authority unless the local authority indicates otherwise.

Feel free to contact me for any further questions on well and septic systems as it pertains to getting a mortgage, or any other questions in general related to conventional loans, FHA loans, and VA loans.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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