HUD Guidelines On FHA Property Standards For FHA Loans

This BLOG On HUD Guidelines On FHA Property Standards For FHA Loans Was UPDATED On January 15th, 2018

The United States Department of Housing and Urban Development (HUD) is the parent of the The Federal Housing Administration (FHA).

  • FHA insures residential mortgage loans to millions of home buyers and is the largest insurer of homes in the United States
  • The Federal Housing Administration insures over one trillion in residential mortgage loans in the United States
  • FHA Loans is the most popular mortgage loan program in this country
  • FHA is not just for first time home buyers and those with bad credit
  • Many times, FHA is the best route to go because of its leniency with debt to income ratios, prior bad credit, allowing non-occupant co-borrowers, and being able to purchase two to four unit properties with 3.5% down payment

Comparison Of FHA Loans Versus Other Loan Programs

FHA insured mortgage loans are not only for home buyers with bad credit.

  • Mortgage loan borrowers with good credit and income choose the FHA insured mortgage loan route due to one reason or another
  • FHA Loans has many advantages such as the following:
    • 3.5% down payment requirement
    • Lenient debt to income ratio requirements
    • Much more lenient mortgage lending guidelines
  • FHA insured mortgage loans also allow for gift funds to be used for down payment
  • Multiple non-occupant co-borrowers
  • Being able to qualify for mortgage with outstanding collections and/or charge offs without having to pay outstanding balances

Benefits Of FHA Loans

  • Non-occupied co-borrowers
  • Outstanding collection accounts and charge off accounts do not have to be paid off
  • Prior bad credit
  • 3.5% down payment for owner occupied multi unit homes
  • Conventional loan programs require at least a 15% down payment on multi unit owner occupied homes
  • FHA mortgage loans have lower mortgage rates than conventional loans
  • FHA Loans are less credit score sensitive with pricing
  • They do not have risk based pricing for credit scores where it penalizes mortgage borrowers with credit scores under 720

FHA Mortgage Lending Guidelines

Bottom line is that FHA insured mortgage loan lending guidelines are much looser with regards to the following:

  • Income
  • Assets
  • Credit

FHA has much lenient mortgage guidelines than conventional mortgage loan programs.

  • However, FHA is somewhat stricter when it comes to FHA property standards
  • FHA property standards are reasonable but do require that the property needs to be safe, secure, habitable, and resalable

Are FHA Home Appraisals Tougher Than Conventional Appraisals?

Many home sellers will not accept any offers on their home if the home buyer wants to get FHA Financing.

  • For some reason, there are sellers that believe that their home will not pass FHA Appraisal but will pass Conventional Appraisal
  • This belief will cost them a good home buyer
  • There is no difference between a conventional appraisal than a FHA, VA, USDA Appraisal
  • Maybe back prior to the Great Recession and 2008 Mortgage & Credit Meltdown, things may have been different but not anymore
  • If a home does not pass FHA Appraisal, it will definitely not pass Conventional Appraisal
  • If a room does not have finished flooring, the home with not pass any home appraisal period

The only difference with a FHA Appraisal is that the appraiser needs to be HUD Certified Appraiser. All HUD Approved Appraisers can do Conventional Appraisals. Most Conventional Loan Appraisers are HUD Approved Appraisers.

What Do FHA Appraisers Look In A Property

FHA property standards mandates that the subject home have access to the subject home without going through or trespassing an adjoining home.

  • The subject home needs to be accessible from the public area giving it direct access to the subject property
  • This FHA property standards requirement further states that the subject home must have easy access to people and vehicles from a private or public street with a solid surface
  • In the event if the accessible public street is owned privately, the homeowners association needs to maintain it

FHA Property Standards On Safety And Security Safe

Safety and security is one of the most important FHA property standards required for the subject property.

  • The Federal Housing Administration mandates that the properties they insure needs to be safe from health hazards and be safe from hazards such as broken windows, faulty wiring, or structural defects
  • In the event if these safety and security issues does exist, it needs to be corrected prior to the mortgage lender funding the loan
  • FHA also requires that the subject property needs to be separate from adjoining properties via a wall that is of full height tall
  • FHA property standards also require that the subject property needs to be graded so water does not linger and the water will drain from the subject property’s exterior walls and does not create a water puddle

FHA Property Standards: Foundaton And Roofs

The Federal Housing Administration’s FHA property standards also mandates that the property be on solid foundation and is free from defectiveness such as poor workmanship, mold, leaks, and other building deterioration defects.

  • The roofs on the subject property needs to be free of any leakage and have at least a 3 year life span left

INTERIOR FHA PROPERTY STANDARDS

FHA property standards require that the subject property have separate quarters and rooms for the following:

  • Eating
  • Cooking
  • Sleeping
  • Living
  • Proper sanitary for bathrooms, showers, sinks
  • Safe drinking water

FHA Property Standards Versus Other Loan Programs

There is no difference on FHA Property Standards Requirements versus Conventional Loans and other loan programs. All home loans need property standards that are the following:

The subject property needs to have the following for not just FHA Loans but all other loan programs:

  • Sanitary disposal system
  • Working plumbing
  • Electrical
  • HVAC systems without any building violations and per code

Proper Ventilation Systems In Areas Of House

The following areas needs proper ventilation systems:

  • Basements
  • Crawl spaces
  • Attics

The above spaces needs to have ventilation in place so that moisture and/or heat will not create safety hazards or building deterioration.

Home Buyers looking to qualify for a mortgage with a direct lender with no mortgage overlays on government and conventional loans can contact us at The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at gcho@usa-mortgage.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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