FHA Property Requirements: What To Look Out For

Upon moving into a new home, it’s natural to anticipate a safe and inhabitable space. This is where the FHA minimum property standards play a crucial role, benefiting both borrowers and lenders. While some of these standards may seem fundamental, they establish a baseline for livability. Allow me to provide you with the essential details.

Understanding the FHA Minimum Property Requirements

The FHA’s minimum property standards encompass three key requirements:

• Safety: Ensuring a secure and healthy environment within the house.
• Security: Providing protection to the occupants of the property.
• Soundness: The home should be free from any structural flaws.

These standards aim to safeguard home buyers using an FHA loan, ensuring properties are move-in ready and meet minimum livability requirements.

From a lender’s perspective, it’s crucial to recognize that the value of real estate serves as collateral for mortgage loans. A property facing condemnation due to imminent roof collapse or an unstable foundation severely diminishes its value. Such a property could result in a total loss or, at best, delay the buyer’s move-in. While this article focuses on FHA minimum property standards, it’s noteworthy that similar guidelines apply to other government-backed mortgages, such as VA loans.

Understanding FHA Minimum Property Standards

An FHA appraisal is conducted by an FHA appraiser and comprises two primary components.

• The appraiser verifies that the home complies with the FHA’s minimum property standards. This involves conducting the safety, security, and structural checks mentioned earlier.
• The appraiser is tasked with assessing the property’s value, crucial as the home acts as collateral in case of mortgage default. To ensure responsible lending, the lender bases the loan amount on the property’s worth after deducting your down payment or remaining equity. Appraisers analyze your property and seek recently sold homes for comparison. For instance, a two-bedroom ranch will likely be compared to another two-bedroom ranch of similar size.

Each FHA appraisal hinges on the Uniform Residential Appraisal Report, a document that prompts the appraiser to detail fundamental property information and the neighborhood’s condition. Delving further, it assesses the property’s physical state and distinctive features, like solar panels or a swimming pool.

On subsequent pages, the appraiser evaluates up to three comparable sales nearby, adjusting the property’s value based on these comparisons. This analysis culminates in the appraiser’s expert opinion on the property’s worth, pivotal for mortgage processes. Despite variations in forms and property-specific nuances, these core elements remain consistent across FHA appraisals for all property types.

• Single-family residences: This document represents the typical Uniform Residential Appraisal Report.
• For multifamily properties with two to four units, the valuation is determined using either Fannie Mae Form 1025 or Freddie Mac Form 72.
• Manufactured homes: These properties follow either Fannie Mae Form 1004C or Freddie Mac Form 70B.
• Condominiums: Condo valuations adhere to Fannie Mae Form 1073 and Freddie Mac Form 465 criteria.

Checklist for FHA Minimum Property Standards

Utilize the checklist below to verify if a property meets the minimum FHA appraisal standards. While not as comprehensive, this process mirrors a home inspection that individuals typically undergo.

FHA Interior Property Requirements for the Home

FHA loans require specific conditions to be met for a home’s interior to meet appraisal standards. These criteria do not encompass cosmetic issues that can be easily remedied.

Common issues affecting indoor appraisals include the following:

• Handrails are essential for staircase accessibility.
• Chipping lead paint poses a concern due to its common use in houses constructed before January 1, 1978. Appraisers will mandate proper addressing of any chipped paint to ensure safety.
• If asbestos, a hazardous material, is discovered, it must be addressed before a home can pass the FHA appraisal.

Household Systems and Appliances

The appraiser must ensure the home’s systems are operational, including major appliances sold with the property. Documentation and inspection of the heating source, water heater, electrical, and air conditioning systems are vital steps in the process.

Basement And Crawl Space

A home’s basement and crawl space should have good ventilation and show no signs of termite infestation or structural damage. It’s also crucial to prevent dampness in the basement and avoid foundation settling.

Bathrooms

Besides the electronic checks mentioned earlier, the appraiser will also inspect the sinks and toilets in the bathroom. They will ensure that your shower or bath fixture functions properly and that you have access to hot water.

FHA Exterior Property Requirements for the Home

Besides inspecting the interior, the exterior of the home will also undergo evaluation. If the home exhibits any of the hazards listed below, repairs by the homeowner are probable.

Property Access

The property must have adequate access to a street or alternative means for future owners to reach it easily throughout the year.

Roof

The FHA mandates a minimum of 2 years of remaining life for the roof. During appraisal, the inspector will assess for issues such as holes, loose or absent shingles, and correct gutter and downspout connections.

Foundation

To pass inspection, the foundation must be correctly graded and equipped with adequate drainage to prevent water damage. It should be free of cracks, avoid noticeable settling, comply with local building codes, and exhibit durability without any concerns.

Key Takeaways

FHA minimum property standards safeguard both lenders and buyers against challenges associated with properties with significant physical damage or potential health and safety risks. Appraisers focus on exterior issues such as damaged roofs, foundation cracks, and any obstructions hindering property access. In the interior, they scrutinize details like missing handrails or chipped paint, which may signal lead hazards. Moreover, they assess a home’s major systems, basement or crawl space, and bathrooms to ensure all are functioning properly.

Having grasped the FHA’s minimum property standards, you can explore mortgage choices by completing an application or contacting us directly at 719.247.6622.