The Federal Housing Administration (FHA) guarantees loans with lower down-payment requirements, usually to first-time homebuyers who may have trouble coming up with the 20% down payment upfront. To insure the homebuyer receives a quality purchase, there are specific requirements homes must meet to be eligible for a loan guarantee through FHA.
FHA Requirements
HUD, or the U.S. Department of Housing and Urban Development, requires that homes meet specific standards prior to allowing a loan guaranteed by the FHA to fund the purchase. Even relatively minor defects in the property's condition may need to be remedied prior to the closing of the loan if these defects somehow potentially endanger the safety of the occupants.
When the home receives an FHA appraisal, a HUD-approved appraiser must report any important property damages and make a professional decision on which items need repair prior to the loan being submitted for underwriting. As the appraiser points items out, specifically ask what you need to do to get the problem fixed so that it will pass FHA inspection.
Home Location
- The street where the home is located must be paved and easily accessed by pedestrians, vehicles, and emergency personnel.
- The home may not be near anything explosive, such as high-pressure petroleum lines or high-voltage power lines.
Roof Concerns
- Roofs with leaks will need repair. In some cases, if the appraiser does not see leakage but notices significant wearing of the roof, it may be necessary to repair or replace the roof. The roof must be declared sound for another two years.
- Roofs cannot have more than three levels of roofing materials.
Paint
- On homes built prior to 1978, any defective painted surfaces will need sanding, priming and repainting with care taken to minimize exposure to lead.
- Chipping or otherwise damaged paint may warrant this need. In addition, if the finish of the exterior of the home is unprotected, and there are defects to the paint itself, this will need attention.
Safety
- Any type of hazardous material on site will require removal.
- There can be no frayed or exposed wiring on the electrical box.
- Any asbestos in the home must pass further inspection from an asbestos professional.
- Any type of access or egress from the bedrooms to the exterior of the home considered inadequate, such as broken windows, need attention.
Livability
- Standing water against the foundation or a wet basement warrants repair.
- Faulty mechanical systems, including the heating, plumbing and electrical systems warrants repair.
- All rooms that are habitable must be heated, unless the city where the home is located has very mild winters.
- The water heater must convey, and it must be up to code.
- Bathrooms must have a toilet and a sink. The home must have a shower. All must be functional.
- Foundational problems are often a problem for appraisers. If there is a crack or other disturbance in the foundation of the home specifically caused by settlement, or other major damage, the appraiser will want this repaired.
Local code may also require some changes or updates to occur. Check with your appraiser to determine what needs to be completed prior to the FHA loan receiving underwriting. The best source for answers to specific questions regarding inspection requirements is the FHA.
No Longer of Concern
The following repairs used to be required for FHA loans, but they are now at the discretion of the appraiser:
- Handrails to steps were always a concern, but no longer are an automatic repair need.
- There is no longer a requirement for the home to have insect inspections.
- Worn out or soiled floor coverings no longer need immediate attention.
- Minor plumbing problems are okay, as long as they do not cause significant damage to the home.
- Poor workmanship in and of itself is not a reason for a repair to be needed.
- Driveway surfaces do not have to have all-weather protection.
- For homes built after 1978, damage to plaster, sheet rock, paint or ceiling material does not need automatic attention.
Avoid Surprises
Even if you're not looking to take out an FHA loan, you should still have the home inspected before you buy it. There are few things worse for a new homeowner than running into a surprise leak or structural issue soon after you move in. These rules are there to protect you and insure a sound home purchase while also protecting the interests of the FHA as the guaranteeing agency.
