HUD Guidelines On FHA Property Standards For FHA Loans
This BLOG On HUD Guidelines On FHA Property Standards For FHA Loans Was UPDATED On March 1st, 2019
The United States Department of Housing and Urban Development (HUD) is the parent of the Federal Housing Administration (FHA).
- FHA insures residential mortgage loans to lenders in the event borrowers default on their FHA Loans
- FHA 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
- Homebuyers are able to purchase two to four-unit properties with 3.5% down payment
In this article, we will discuss and cover HUD’s property standards and guidelines.
Comparison Of FHA Loans Versus Other Loan Programs
FHA Loans are not only for home buyers with bad credit.
- Borrowers with good credit and income choose the FHA 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 also allows for gift funds to be used for down payment
- Multiple non-occupant co-borrowers
- Being able to qualify for a 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 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 borrowers with credit scores under 720
HUD Mortgage Lending Guidelines
Bottom line is HUD guidelines are much looser with regards to the following:
HUD has much lenient mortgage guidelines than conventional loans.
- However, HUD 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 an FHA, VA, USDA Appraisal
- Maybe back prior to the Great Recession and 2008 Mortgage & Credit Meltdown, things may have been different but not any more
- 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 an 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 has 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 are one of the most important FHA property standards required for the subject property.
- The Federal Housing Administration mandates that the properties they insure need 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 do exist, it needs to be corrected prior to the lender funding the loan
- HUD 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
- This is 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: Foundation And Roofs
The Federal Housing Administration’s FHA property standards also mandate that the property is on a solid foundation and is free from defectiveness such as poor workmanship, mold, leaks, and other building deterioration defects.
- The roofs on the subject property need 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:
- Proper sanitary for bathrooms, showers, sinks
- Safe drinking water
FHA Property Standards Versus Other Loan Programs
There is no difference in 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
- HVAC systems without any building violations and per code
Proper Ventilation Systems In Areas Of House
The following areas need proper ventilation systems:
- Crawl spaces
The above spaces need 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 Gustan Cho Associates at Loan Cabin Inc. at 262-716-8151 or text us for faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.