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Federal Housing Commissioner. US Department of Housing and Urban Development.

What is an FHA Amendatory Clause?

When you do an FHA home loan, whether you are buying or refinancing, the Federal Housing Administration offers mortgage insurance for home loans to consumers.  FHA puts requirements into the mix to ensure that things are being done correctly.  One such FHA requirement is referred to as the FHA Amendatory Clause.

The FHA Amendatory Clause is put in place to make sure that the homeowner receives information on the property in a timely manner before the purchase is actually made. The Amendatory Clause also states that if the buyer has not received information about the appraisal of the home, then they are no longer obligated to buy the home. In addition, if the appraisal information is not delivered according to the terms of the clause then the earnest money doesn’t have to be forfeited. 

The FHA Amendatory Clause is the most effective when the transaction involves a traditional seller, meaning the home’s current owner, a home builder, and possibly even a real estate investor.  Keeping these people in check is very important, and FHA wants to uphold their name.  This clause is not effective in the case of a foreclosure or a non-profit organization simply because these transactions are a little different.

The FHA Amendatory Clause should be a part of your documentation when you are looking over your documents.  In the myriad of paperwork that you have to sign, this document will be a part of it all.  It’s hard to know what you are looking at when you don’t understand it, and it seems you have only a million and one things to sign, but it’s important because your home is your largest financial obligation. Also, this documentation must be in place in order for you to get the mortgage insurance that is essential to any homeowner. 

In addition to the protection that the FHA Amendatory Clause provides for you and your family, there are many beneficial provisions that FHA makes to new homebuyers.  FHA offers counseling type courses on avoiding a foreclosure, and a servicing center that can be contacted if they believe that the lender isn’t doing what they should to comply with the FHA requirements.

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