🏠 Bank‑Required Inspections in Texas:

FHA, VA, Conventional & Fannie Mae

Understanding Phase 1, Phase 2, and Phase 3 Inspections

Before diving into each loan type, it helps to clarify what “Phase 1, Phase 2, Phase 3” means. These are NOT federal terms—they are Texas builder/inspector workflow terms used by lenders to verify construction quality before approving a mortgage.

🔧 Texas Construction Inspection Phases (General Definitions)

Phase	What It Covers	Purpose
Phase 1 – Pre‑Pour / Foundation Inspection	Soil preparation, formwork, reinforcement, post‑tension cables, plumbing rough‑in	Ensure the foundation is structurally compliant before concrete is poured
Phase 2 – Pre‑Drywall / Framing Inspection	Structural framing, roof decking, mechanical rough‑ins (HVAC, plumbing, electrical), window/door installation, WRB, flashing	Verify structural integrity and building envelope before insulation and drywall
Phase 3 – Final Inspection	Full home inspection after completion: systems, safety, code compliance, functionality	Confirm the home is complete, safe, and ready for occupancy

Now let’s break down what each loan type requires at each phase.

🟦 1. FHA Loan Requirements

FHA follows HUD Minimum Property Standards (MPS) and HUD Handbook 4000.1.

Phase 1 – Foundation

• Inspector must verify compliance with HUD MPS and local building codes.
• Special attention to:
  • Reinforcement placement
  • Post‑tension cable layout
  • Proper compaction and drainage
• FHA may require a HUD‑approved engineer’s certification if the foundation deviates from standard practice.

Phase 2 – Pre‑Drywall

• FHA requires confirmation that:
  • Framing meets structural standards
  • Electrical, plumbing, and HVAC rough‑ins comply with code
  • Fire‑blocking and draft‑stopping are properly installed
  • WRB and flashing are correctly integrated
• Any deficiencies must be corrected before drywall installation.

Phase 3 – Final

• FHA requires the home to meet:
  • HUD MPS
  • Safety and habitability standards
  • Functionality of all systems
• The inspector must confirm:
  • Appliances operate
  • HVAC is functional
  • Hot water is available
  • No health/safety hazards exist
• Lender may require a 1004D Final Inspection to certify completion.

🟥 2. VA Loan Requirements

VA follows VA Minimum Property Requirements (MPRs) and focuses heavily on safety, structural soundness, and habitability.

Phase 1 – Foundation

• VA requires the foundation to be:
  • Structurally sound
  • Free of settlement risks
  • Built according to engineered plans
• For new construction, VA often requires:
  • Builder certification
  • Engineer’s foundation letter

Phase 2 – Pre‑Drywall

• Inspector must verify:
  • Structural framing integrity
  • Proper installation of mechanical rough‑ins
  • Adequate moisture protection (WRB, flashing, roof underlayment)
• VA is strict about:
  • Termite protection
  • Moisture intrusion prevention

Phase 3 – Final

• VA requires:
  • Full compliance with VA MPRs
  • All utilities operational
  • No safety hazards
  • Proper grading away from the structure
• A VA Compliance Inspection Report (Form 26‑1839) may be required.

🟩 3. Conventional Loan Requirements

Conventional loans (non‑government) follow Fannie Mae or Freddie Mac guidelines depending on the lender.

Phase 1 – Foundation

• Inspector verifies:
  • Compliance with local building codes
  • Structural adequacy
  • Proper reinforcement and plumbing rough‑in
• Engineering certification may be required if the design is non‑standard.

Phase 2 – Pre‑Drywall

• Lenders want assurance that:
  • Framing is structurally sound
  • Rough‑ins meet code
  • Building envelope is properly sealed
• Some lenders require a third‑party inspection report for risk mitigation.

Phase 3 – Final

• Conventional loans require:
  • A complete, functional home
  • No major defects
  • All systems operational
• Typically documented using:
  • Appraisal Form 1004D (Completion Report)
  • Or a third‑party final inspection report

🟨 4. Fannie Mae (New Construction)

Fannie Mae has specific requirements under Selling Guide B4‑1.2‑03.

Phase 1 – Foundation

• Inspector must confirm:
  • Foundation built per plans
  • Compliance with local code
  • Proper drainage and site preparation
• If the foundation differs from plans, an engineer’s certification is required.

Phase 2 – Pre‑Drywall

• Fannie Mae requires verification of:
  • Structural framing
  • Mechanical rough‑ins
  • Weatherproofing and flashing
• Lenders often require a third‑party inspector to reduce construction risk.

Phase 3 – Final

• Fannie Mae requires:
  • A completed home meeting all local codes
  • Operational systems
  • No health/safety issues
• Appraiser must complete:
  • Form 1004D to certify completion
• If the home is newly built, a Certificate of Occupancy (CO) is mandatory.

🧩 Summary Table

Loan Type	Phase 1	Phase 2	Phase 3
FHA	HUD MPS compliance, structural verification	Rough‑in and envelope compliance	Final safety & habitability; 1004D
VA	Structural soundness, engineer letter	MPR compliance, moisture protection	VA MPR final inspection; Form 26‑1839
Conventional	Code compliance, structural adequacy	Rough‑in verification	1004D or third‑party final
Fannie Mae	Code + engineered compliance	Structural + envelope verification	1004D + CO required

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