What Are The Property Condition Standards For FHA Loans?

When buying your home, you are probably looking for a property ready to move into and safe for you and your family. If you are using an FHA loan to buy your home, the home has to meet certain FHA property condition requirements to ensure it's liveable.

FHA loans have pros and cons. One of the cons would be the home must meet certain standards.

We will examine the FHA loan property condition requirements that a home must meet so you'll be prepared when purchasing a home.

Finding out these requirements after the fact can be disheartening when you're not expecting it.

FHA Minimum Property Requirements

There are three main elements that a home has to meet to be eligible to be purchased using an FHA loan:

• Safety: The home has to offer a safe environment.
• Security: There should be sufficient protection.
• Soundness: There can’t be any structural defects.

These requirements ensure the home is liveable and the buyer is protected. This is also beneficial to the lender. The lender wants to make sure that there is enough collateral to cover the cost of the loan should the buyer foreclose. It isn't worth much if the home is condemned due to serious problems.

An appraiser will assess the property to ensure the home meets the FHA minimum requirements.

FHA Appraisal Requirements

An appraiser approved by the FHA will check the home to ensure it meets the minimum requirements for an FHA loan approval. As well as checking the home meets these minimum standards, the appraiser will evaluate the home's value.

The appraiser fills out the Uniform Residential Appraisal Report to complete their appraisal. This report asks for some basic information and an assessment of the neighborhood the home is situated in.

The appraiser will find comparable homes sold in the same area recently to assess the home's value. These homes will be compared to the purchased home, with value-added or deducted based on how they compare.

The appraiser will use their experience and judgment to find the home's value based on these comparables.

FHA Requirements Checklist

If you aren’t sure if the home you want to buy will pass the FHA appraisal, this checklist will help you see if the minimum requirements are met.

While the FHA appraisal might sound similar to a home inspection, the inspection process is a more in-depth check on the home. The appraiser is more concerned about the following issues:

The Interior

While the appraiser won’t be concerned with the home's cosmetic problems, missing handrails will be a problem. That could mean the home isn’t safe, and other potential issues could include lead paint and asbestos.

Systems and Appliances

The appraiser will check the home's systems, including whether the appliances function. The HVAC, electrical, and water heater will be checked to ensure they work.

Bathrooms

The appraiser will ensure the toilets, sinks, baths, and showers function. They will also check that hot water is available.

Basement and Crawl Spaces

The home needs to be well-ventilated if it has a basement or crawl space. The appraiser will look for termite damage, dampness, and other issues.

The Exterior

The outside of the property has to be checked as well. There could serious issues that affect the value or present hazards to the home buyer.

The Roof

There needs to be some life left on the roof. Even if it doesn’t let in moisture, it shouldn’t need to be replaced for at least 3 years. They will look for missing shingles or tiles and check that the gutter and downspouts are properly connected.

The Foundation

The home's foundation has to be graded properly, with enough drainage to avoid water damaging the foundations. It should be free of cracks or show any signs of settling. The building codes for the area also have to have been followed.

Access

The home needs to be accessible all year round. This usually means street access sufficient for the resident to enter and leave the home.

You likely cannot purchase a fixer-upper with an FHA loan.

Final Thoughts on FHA Requirements

While the FHA appraisal can cause concern, it protects the buyer, ensuring the home meets the FHA minimum property standards. It ensures the home is ready to move into and a safe place free of hazards.

The appraiser will check that the home has no major problems that will be serious for the owner. Systems in the home will work as expected, which should mean there aren’t any large bills for the owner shortly after they move in.