HUD Property Guidelines And Requirements On FHA Home Loans

This Article Is About The HUD Property Guidelines And Requirements On FHA Home Loans:

FHA loans are the most popular type of mortgage loan program in the United States. First-time homebuyers, borrowers with less than perfect credit, and those who recently filed for bankruptcy and/or had a housing event can become eligible for FHA financing. However, FHA loans are for owner-occupant primary one-to-four unit homes only.

FHA loans are ideal for first-time homebuyers with as little as a 3.5% down payment. Homebuyers can become eligible for FHA loans in just two years after Chapter 7 bankruptcy discharge. Homebuyers in an active Chapter 13 Bankruptcy repayment plan are eligible for FHA loans just one year into the Chapter 13 repayment plan. There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for an FHA loan.

Homebuyers with less than perfect credit and bad credit can qualify for an FHA loan. Outstanding collections and charged-off accounts do not have to be paid off. Borrowers with lower credit scores are eligible for FHA financing. To qualify for a 3.5% down payment FHA loan, the minimum credit score required is 580. Homebuyers with under 580 credit scores and down to 500 FICO are eligible for an FHA loan. However, if your credit score is under 500 FICO, you need a 10% down payment.

The waiting period is only three years after a foreclosure, deed in lieu of foreclosure, short sale to qualify for an FHA loan. In this article, we will discuss and cover the property standards for FHA financing.

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Safety Is Key For The Property To Be Eligible For An FHA Loan

HUD Property Guidelines require homes need to meet basic safety requirements.

HUD Property Guidelines require homes need to meet basic safety requirements.

Per FHA Property Guidelines, the subject property needs to be habitable, be safe, and be secured. If the home appraisal does not meet minimum HUD Property Guidelines, the home appraiser will not pass the home appraisal. The defects noted by the appraiser that do not meet HUD Property Guidelines need to be corrected and a re-inspection needs to be ordered.

Most home sellers who are represented by listing agents realize the home needs to meet HUD Property Guidelines. In the event, if the property does not meet HUD Property Guidelines, home sellers normally have to do the repairs. An appraisal re-inspection costs money. HUD Property is straightforward.

There is a basic checklist property need to meet to pass the FHA Appraisal Requirements. We will discuss HUD Property Guidelines on this blog.

HUD Property Guidelines On Condition Of Subject Property

HUD, the parent of FHA, wants the property they insure to be in good condition. The property needs to be in move-in condition and habitable. 

The property may be ineligible if there are factors affecting the health and safety of occupants. Structural soundness is a must.

Homes not meeting HUD Property Guidelines, the appraiser will note the defects in the appraisal report. Either home sellers and/or buyers need to correct them.

Once corrected, a re-inspection will need to be ordered. If the defects have been corrected, the appraiser will pass the property. If a property does not meet HUD Property Guidelines and is beyond a simple repair, borrowers can explore going with FHA 203k Loan Program.

FHA 203k Renovation Loans allow acquisition and construction loan all in one closing. 3.5% down payment on the after-improved value is required

Common Issues And Deficiencies On Property Not Meeting FHA Appraisal Guidelines

HUD requires that the subject property be habitable.

HUD requires that the subject property be habitable.

  • Cannot have health hazards such as loose wiring, peeling paint, broken windows
  • Outstanding building violations will be addressed and need to be corrected
  • Appliances need to be operational and in good working order
  • Roofs need to have a 3-year lifespan
  • Garage door openers will be tested and need to be in operating order
  • The foundation needs to be solid
  • No mold allowed
  • Cracks and erosion that may affect the foundation will need to be repaired

HVAC System needs to be fully operational. 

Exterior Inspection Of Subject Property

FHA Appraiser will also inspect the exterior of the subject property. The subject property cannot encroach into an adjacent property such as the following:

  • Garage or outbuilding encroachment to neighbor’s property line
  • Encroaching to utility easements and/or shared driveways
  • Need ample right away and/or access from a private street of the proper

Can FHA Appraisal Be Used On Conventional Loans

Can FHA Appraisal Be Used On Conventional Loans

For homebuyers who are not sure on whether or not to use an FHA or Conventional Loan, we recommend ordering an FHA Home Appraisal. Lenders will honor an FHA Appraisal on Conventional and/or NON-QM Loans. However, a conventional home appraisal cannot be transferred from one lender to another. FHA Appraisals can be transferred from one lender to another.

FHA appraisals have much more weight than conventional appraisals. If a home buyer changes their loan program from conventional to FHA Loan and they ordered a conventional appraisal already, then a new FHA Appraisal needs to be ordered. All non-QM lenders will honor an FHA Appraisal from a different mortgage company but not a conventional appraisal. For more information on this topic, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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