Partial knob & tube wiring and FHA mortgage???

Asked by Hope4collingswood, 91706 Thu Oct 22, 2009

We are planning to purchase an adorable 1921 bungalow in a nice town (offer accepted, through the attorney review period, now onto home inspection). The house is great with new windows, siding, and updated wiring - except for the overhead lights (ceiling). The ceilings are still knob & tube wiring. We heard this MAY be a problem when FHA inspects the property. We heard worst case they can even deny the mortgage on this property all together... Anyone with experience on an FHA loan?

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8
Kim Noonan, Agent, New Lenox, IL
Thu Oct 22, 2009
BEST ANSWER
I've had knob and tube (AKA post and spool) wiring kill FHA loans in the past - if the insulation over the wires has been breached, it can be regarded as bare wiring, which I understand to be an FHA no-no. It also has to be at least 60 amps.

Will the seller change the wiring out so that there are no potential issues?
Perhaps find an electrician that will do the work and accept payment at closing?
0 votes
Laura Gianno…, Agent, Manahawkin, NJ
Sat Oct 24, 2009
Check this link which contains a list of things that must be inspected for FHA mortgage loans...you can click on the links and find what the appraiser will look for.

http://www.hud.gov/offices/hsg/sfh/ref/chap1.cfm

Good luck!

Laura Giannotta
Keller Williams Realty - Atlantic Shore
609-384-6121
2 votes
Michael Ofsa…, Other Pro, Grayslake, IL
Fri Oct 23, 2009
As an FHA Fee Inspector I can offer a little insight. The FHA inspection you are referring to is the apprasial. The apprasial is to determine the value of your home and to ensure it meets FHA criteria. The FHA is insuring your loan and has to sell your home if you default to cover thier loss. If your home has K&T wiring that is in poor condition and the appraiser catches it, they will likely require correction or updating. Depending on your lender and underwriter this can be done one of two ways. Either the current owner makes the corrections or money is held in escrow to ensure the repairs are made after you take possession. Once the repairs are made an FHA Fee Inspector can sign off on it, at your expense, and the escrow funds are released. There is still a possibility that they may not insure your mortgage which means you may have to pick another house, lender or type of loan. Talk with your current lender to find out what your options are.

Insurance is a completely different issue. Contact several carriers to find out what your options are.
2 votes
Okay so I am wondering if the appraiser and the inspector is only required to go into say an attic space with the head up to the shoulders how do they even know what kind of can of worms and what dangers are lurking for potential new homeowners? We bought a house last year only to find out now that there is raw asbestos, knob and tube wiring, and insulation on top of the knob and tube wiring in the attic which we were not informed of at all and only know now after having some home rehab work done and now have an electrician who won't go into the attic because of the dangers. The attic space is easily accessed by anyone so if the doors to that attic space are opened that person is at risk of inhaling the asbestos and there is a major fire hazard. We bought this house believing that there was no major work that needed to be done but we now know different. Now I am going to be worried about a fire constantly.
Flag Wed Oct 2, 2013
Larry Sarlo, Agent, North Wildwood, NJ
Fri Oct 23, 2009
Jim good point. Insurance co will not insure the home with active Knob and tube. Any wind of that and you will have to go surplus lines only, and that is very expensive.

And you must disclose it to the company at time of application. Do not mislead the insurance co that you have updated wiring and not disclose the knob and tube portion. I know it sounds easy and tempting but very dangerous legally.

Maybe if you get an electrician to certify the electric it may help but that is no guarantee either.
Best to negotiate the replace / repair of the electric.
good luck!
1 vote
James Miner…, , Westfield, NJ
Fri Oct 23, 2009
There is more to the Knob & Tube wiring issue than FHA requirements. In my experience it is very difficult, if not impossible, to obtain hazard insurance on a home that has active K&T wiring. Some companies will write the policy, but only if you agree to replace the K&T within a month or two of closing.
1 vote
Hope4colling…, Home Buyer, 91706
Fri Oct 23, 2009
Thanks so much everyone for your answers. Is there somewhere online where we can actually view the FHA standards or codes for their mortgage? Our inspection with FHA is scheduled for Thursday!!! Wish us luck!!! THANKS!
0 votes
Laura Gianno…, Agent, Manahawkin, NJ
Fri Oct 23, 2009
I've had VA loans approved with this type of wiring, and I'll say it was in pretty bad shape. As Larry said, it really depends on the inspector.

Laura Giannotta
0 votes
Larry Sarlo, Agent, North Wildwood, NJ
Thu Oct 22, 2009
Most depends on the inspector but knob and tube is not a problem unless the insulation is breached just as Kim said.

Just confirming her statement for your information.

I also have to disagree with updated wiring if there is still knob and tube... Have you past your inspection time and does your contract allow for repairs and how much...
You could use this as leverage to get the wiring corrected...


Larry Sarlo
Weichert Realtors
609-868-1171
Larry@njhomesandmore.com
Web Reference:  http://www.njhomehunter.com
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