What Is a Mortgage Inspection and What Does It Cover?
Demystify mortgage inspections. Learn their unique role in real estate, protecting lenders by verifying property boundaries and structures.
A mortgage inspection reviews a property primarily for the benefit of a lender or title company. This inspection confirms details about the land and its improvements during a real estate transaction. Understanding what it entails clarifies its importance.
Defining a Mortgage Inspection
A mortgage inspection, often referred to as a Mortgage Loan Inspection (MLI) or Mortgage Inspection Sketch (MIS), is a limited visual assessment of a property’s boundaries and any structures built upon it. This specialized review is conducted by a licensed land surveyor. The surveyor’s work focuses on comparing the physical layout of the property with its legal description as recorded in the property deed.
The primary output of a mortgage inspection is usually a survey sketch or a report. This document graphically illustrates the property lines, the location of existing structures like the house, garage, or sheds, and identifies any visible encroachments or easements. This is a “substandard” survey, meaning it does not establish property corners or confirm precise boundary lines in the same way a full boundary survey would. Lenders commonly order this inspection to assess the collateral for the mortgage.
The Purpose of a Mortgage Inspection
A mortgage inspection safeguards the financial interests of the mortgage lender. Lenders rely on this inspection to verify that the physical boundaries of the property align with its legal description. This confirms the accuracy of the collateral securing the loan.
The inspection identifies potential issues that could negatively impact the property’s marketability or value. This includes structures extending onto neighboring properties or buildings erected over utility easements. By pinpointing these discrepancies, the inspection allows lenders to assess legal risks associated with the property’s boundaries. It can also assist in waiving certain survey exceptions in a title insurance policy, providing clearer title for the property.
What a Mortgage Inspection Identifies
A mortgage inspection identifies elements and issues related to a property’s boundaries and improvements. It verifies the property lines as described in the deed, marking their approximate location on the sketch. The inspection also locates existing structures on the property, such as the main residence, detached garages, and sheds.
The surveyor notes the placement of fences, driveways, and any visible utility lines. Identifying potential encroachments is a key aspect. This could involve a neighbor’s fence or structure extending onto the property, or a portion of the subject property’s structure extending onto adjacent land. Visible easements are also documented. The inspection can highlight compliance with zoning setbacks and indicate if an area is within a flood hazard zone.
Mortgage Inspections Versus Other Property Reviews
Mortgage inspections are often confused with other property assessments, but their purposes and scopes differ. A traditional home inspection focuses on the structural and mechanical condition of the house. A home inspector examines components such as the roof, plumbing, electrical systems, and heating, ventilation, and air conditioning (HVAC) to identify defects or necessary repairs. This inspection benefits the homebuyer, offering detailed insights into the property’s physical health.
In contrast, a property appraisal determines the market value of the home. An appraiser evaluates the property based on its features, condition, location, and recent sales of comparable properties in the area. This assessment is required by the lender to ensure the property’s value supports the loan amount. All three processes are integral to real estate transactions, serving different objectives and conducted by specialized professionals.