FHA Property Standards

HUD Guidelines for FHA Loans: FHA Property Standards

Gustan Cho Associates are mortgage brokers licensed in 48 states

This article covers acceptable property standards for FHA home loans.

Many home sellers are concerned about homebuyers applying for FHA loans. They mistakenly believe that FHA home appraisals are very strict and the appraiser will deny the property from passing inspection. This is not the case.

HUD, the parent of FHA, does require the home to be habitable, safe, and marketable. You can have an older roof and pass FHA inspection as long as there are at least three years of life remaining. However, you will not pass FHA property inspection if you have peeling lead-based paint or broken glass.  In this article, we will cover FHA property guidelines.

Prequalify for an FHA home loan now. 

Are FHA Home Appraisals Tougher Than Conventional Appraisals?

Many home sellers will not accept 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 an FHA appraisal but will pass a conventional appraisal. This belief could cost them a sale to a good buyer.

There is little difference between a conventional (non-government-backed loan) appraisal and an FHA, VA, or USDA appraisal.

Because an FHA loan is backed by government insurance, it goes a little beyond the market value of the property. In addition to completing a traditional appraisal, FHA appraisers must also verify that the home meets minimum standards for health and safety.

Utilities or furnaces that don’t work, peeling lead-based paint in older homes, loose stair railings, and even a lack of smoke and carbon monoxide detectors will need to be fixed before an FHA loan can be approved. If there are problems with the property, they can be fixed. Smaller ones can be cleared up before closing.

If the home needs major rehabbing to be livable, the buyer just gets a different kind of FHA mortgage — the 203(k) loan, which includes funds for fixing the problems and making the home safe. This loan can also be used for fixer-uppers or to include major improvements to the property with the purchase.

It costs the seller nothing extra if the buyer chooses to get a 203(k) loan instead of the standard 203(b) loan.

Related: How Much Home Can You Afford?

FHA Doesn’t Care About Minor Problems

FHA property standards are not especially stringent. Few buyers would want to buy an unsafe home regardless of the loan they get.

The FHA doesn’t care about cosmetic or minor defects, deferred maintenance, and normal wear if they don’t impact safety, security, or soundness of the home. Here are examples of defects that don’t ncessarily safety problems:

  • Missing handrails
  • Cracked or damaged exit doors
  • Cracked window glass
  • Peeling (non-lead-based) paint
  • Minor plumbing leaks (such as dripping faucets)
  • Defective floor finishes or coverings (worn through the finish, badly soiled carpeting)
  • Evidence of previous (non-active) termite damage where there is no evidence of unrepaired structural damage
  • Rotten or worn-out countertops
  • Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed after 978
  • Poor workmanship
  • Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
  • Crawl spaces with debris and trash
  • Lack of an all-weather driveway surface

These issues are not pretty but they won’t prevent you from buying a home.

Related: Understanding Your Mortgage Payment


What FHA DOES Care About

The Federal Housing Administration’s FHA property standards are not crazy. Most items that come up would cause also problems for a conventional loan inspection or appraisal.

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

Electrical and Heating

  • The electrical box should have no frayed or exposed wires.
  • All habitable rooms must have a functioning heat source unless winters are mild

Roofs and Attics

  • Roofs must keep moisture out and have at least a two-year life span remaining.
  • The appraiser must inspect the attic for roof problems.
  • The roof cannot have more than three layers.
  • If the inspection reveals the need for roof repairs, and the roof already has three or more layers of roofing, the house needs a new roof.

Water Heaters

The water heater must meet local building codes and must stay with the property.

Hazards and Nuisances

These can make the property uninhabitable, unsafe or unsellable. Common hazards include:

  • Contaminated soil
  • Nearby hazardous waste site
  • Oil and gas wells located on the property
  • Heavy traffic
  • Airport noise and hazards
  • Other sources of excessive noise
  • Nearby dangers like a high-pressure petroleum line, high-voltage power line, or radio or TV transmission tower

Any defects that could cause future structural damage must be corrected before the property can be sold. For example, defective construction, extreme dampness, leakage, decay, termite damage, or instability (settlement).

If an area of the home contains damaged or deteriorating asbestos, additional inspection and possible repair are required.

The home must have a toilet, sink, and shower.

FHA Property Standards vs Other Loan Programs

There is no difference in FHA property standards and those for conventional loans. All home loans need property standards that are the following:

The subject property needs to have the following:

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

Proper Ventilation Systems

The following areas need proper ventilation systems:

  • Basements
  • Crawl spaces
  • Attics

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

See today’s FHA mortgage rates. 

Homebuyers 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 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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