Whether you’re a buyer or seller, knowing the FHA’s requirements could make the difference between an easy sale, or a difficult one. Any home that could be covered by an FHA loan must meet the General Acceptability Criteria set forth by the U.S. Department of Housing and Urban Development. We want to give our readers a broad overview of what this means for you, how you can make sure your home, or future home, meets these standards, and what to do if it doesn’t.
Why Do These Requirements Exist?
These standards exist to ensure that the home in question would make good collateral in the event that the buyer is no longer able to pay back their FHA loan. In the case of a foreclosure, the lender wants to make sure that the home has sufficient resale value and meets basic housing and living standards, such as:
Safety – The home is safe in all areas. The structural integrity of the home is intact and the home does not have any overt hazards. It is in livable condition and will not put anyone in harm’s way.
Security – The home must be in good condition for a potential resale. If the owner defaults on the home the lender must be assured that they can make their investment back if the home goes into foreclosure.
Soundness – The overall structure, foundation, and condition of the home are sound, livable, and safe for all inhabitants.
What Are FHA Loan Requirements?
To make it straightforward and streamlined for our readers, we have compiled a comprehensive list of the FHA’s requirements into a checklist that can be checked off as you go to inspect your property. A complimentary printable version of this list can be downloaded, and printed at your convenience, to your device HERE.
We compiled this list using sources from Investopedia and the FHA Policy Handbook.
What to Look Out For:
Heating & Electrical
- The fuse box must be free of exposed or frayed wires.
- Rooms must all have a heat source, except in cases of select cities with mild winters.
- Heating must meet any local requirements and be safe from hazards.
Roofing, Attics, and Crawl Spaces
- Roofs must keep moisture out of the building.
- Roofs must not consist of more than three layers of roof tiles.
- Roofs must be expected to last at least two more years.
- Roofs will be inspected from inside the attic space, if possible, by an appraiser for potential problems.
- Must have sufficient ventilation of attics and crawl spaces.
- Must be able to access attics and crawl spaces.
Water & Sewage
- Water heaters must meet local building standards.
- Property must have sufficient drainage away from the building’s foundation.
- Must have adequate access to a water supply.
- Must have sufficient sewage disposal.
- Any septic systems, if present, must be in working condition.
General Condition of Home & Property
- Property must be safely accessible by vehicles and people from either public or private streets.
- Foundations must be in good condition.
- Electricity must be present and available for any lighting and electrical equipment.
Potential Hazards
- Mechanical systems must be protected from dangerous elements and be of a sturdy and sound quality.
- There should be no lead paint present anywhere in the home.
- Must not have evidence of any infestations.
- Must not have underground storage tanks.
- Soil must be free of contaminants.
- Broken glass, inaccessible doors, stairs without railings, and broken windows must not be present in the home.
- There should not be any defective elements present. Any poor construction that results in leaks or property decay must be remedied before approval can occur.
What You Can Ignore, For Now
While there are plenty of things that would need to be fixed to meet FHA’s housing requirements for a loan, there are specific things that would not. Those would fall under the umbrella of cosmetic or minor damages and would not need to be fixed for the home to pass the minimum requirements. With that in mind, you can prioritize any repairs that the FHA would require to be fixed for approval, and put aside the ones that they wouldn’t, at least for the time being.
You can put aside:
- Holes in window screens.
- Cracked window glass.
- Defective interior paint in housing constructed after 1978.
- Minor plumbing leaks that do not cause damage.
- Defective flooring finishes or coverings
- Damaged or worn-out countertops.
- Damaged plaster or wall materials in housing constructed after 1978.
- Trip hazards. (damaged sidewalks, poorly installed carpeting)
If the Property Doesn’t Meet FHA Loan Requirements
If the home of your dreams does not meet the minimum housing standards as required by the FHA, there are options depending on the scenario.
- If the Seller is Willing to Make The Repairs:
Then you’re all set! The seller can make the repairs as required by the FHA and can be reappraised for approval after the repairs are completed. - If the Seller Cannot Complete Repairs:
The seller may not be able to complete needed repairs because of financial issues, or other factors. As a buyer, particularly if the house is already below market value, you can offer to increase the price to incentivize the seller to invest in the needed repairs. The seller will then get their money back after the sale, and you can get the home that you want through a FHA loan. - If the Seller is a Bank:
Unfortunately, if the seller is a bank they may not be willing to make needed repairs. If this is the situation you have found yourself in, then this may be the end of the road for you and this particular home. The bank may only be willing to sell the home in an “as is” condition to a buyer who can purchase without a FHA loan.
In Conclusion
In terms of accessibility, an FHA loan is a great option for first-time homebuyers, buyers with lower down payments, or those who have had issues qualifying for mortgages in the past. However, finding a home that meets FHA’s requirements can be difficult if you don’t know what to look out for. With comprehensive knowledge of these requirements now at your disposal, you can feel assured that you can find a home that meets FHA’s standards, and your own. Get ready to find the home of your dreams!
About Gerardo Zavala, Realtor
There is a true passion for connecting people with real estate that makes me fall in love with my career over and over again. While my title says, REALTOR® I think I am much more than that. For example, I am present and actively listening to my client’s needs, on the spot when things are urgent, and by your side to say “congratulations.” Most of my clients will say that I am a connection away from support no matter the situation, day, or time. In my opinion, customer service, educating the client on progress and next steps, and overall satisfaction are my top priorities. How can I help you?
