FHA Loan Property Requirements for 2023
If you would like to purchase a home using a FHA loan, it is important to understand the property requirements that determine if a home is eligible to be financed using an FHA mortgage. FHA loans are available in any location in America, but they are restricted to homes that meet specific quality standards. Learn about all property requirements related to FHA loans, including property condition requirements, other property guidelines, as well as the different types of properties you can finance with a FHA loan.
FHA Minimum Property Standards
The term used by the FHA related to their property condition requirements is “minimum property standards”. These standards are designated by HUD and set the guidelines for what is acceptable and unacceptable property conditions. The FHA will not insure any home that does not meet the official HUD minimum property standards. These encompass three categories which are used to assess the habitability of a property, addressing important matters related to safety, security, and soundness.
- Safety – Ultimately, the FHA wants to ensure a property that is safe and habitable. The ways safety is determined is by evaluating all areas of a home that are important to the safety of persons. Homes will also be inspected for all matters related to health, such as sanitation and water systems.
- Security – The FHA insures home loans, which means that if the loan defaults and the home forecloses, the FHA/HUD is responsible to sell the home. Therefore, it is important to ensure the security of the home having resale value.
- Soundness – The structural and foundation conditions must be in satisfactory condition. This means that there can not be any structural damages of any kind which would require repair.
The inspection includes carefully for certain issues related to the above areas of importance. Some of the potential conditions that could make a home unsafe, insecure, or unsound are:
- Lead – One of the most important defects that will be closely looked at is the presence of any lead, such as in the paint. Lead is hazardous and a home must be inspected to make sure a home is free of this harmful material.
- Roof – The roof must be not have any leaks, substantial “wear and tear”, or any noticeable conspicuous defects, such as missing tiles.
- Drainage – The home will be inspected to have adequate drainage systems that flow water away from the house (to prevent flooding).
- Foundation – An aspect of the structural integrity that is analyzed is the foundation of the property. There must not be any foundation or other structural issues.
- Heating – The heater / heating system will be checked to ensure it is able to sufficiently heat the home.
- Sanitation – The home must have all essential sanitation systems, including sewage disposal, heating, hot water, and any other system needed for a particular property to have quality sanitation.
- Walking Areas – steps, stairways, walkways – Any pedestrian walkway must be clear of damage or safety issues. This includes foundation problems, missing stairs, handrails, or anything else that could pose a danger.
This is not a full list of all property conditions for FHA loans. There is a lengthy checklist that a licensed inspector will be looking for. Most homes pass without any issue, but occasionally properties fail the inspection. If a property that you want to purchase does not meet the minimum property standards, there is still hope. If the seller is willing to make the necessary renovations, you can resubmit the property to be reviewed again. As long as the property was repaired to satisfaction, it will then be eligible for FHA financing.
Types of Properties You Can Finance with a FHA Loan
FHA loans are available for many different types of properties.
- Single Family Residence – A one unit property that is not attached to any other units.
- Duplex / 2 Units – A duplex is a property that consists of two attached homes.
- Triplex / 3 Units – A triplex is a property that consists of three attached homes.
- Fourplex /4 Units – A fourplex is a property that consists of four attached homes.
- Townhouses/Condos – FHA loans are available for approved townhouses and condos. You can check the eligibility of townhouse and condo complexes here.
Would you assistance determining property eligibility, or get pre-approved for a FHA loan? We offer no obligation mortgage consultations and quotes, visit this page to request a free consultation.
Frequently Asked Questions
What happens if the home I want does not pass inspection?
If a home does not pass the minimum property standards after inspection, it is not an automatic rejection or the property, nor does it in any way affect your FHA loan application.
Who pays for the FHA inspection?
This should depend on what is negotiated with your seller. Oftentimes, sellers will pay for the inspection. If they are not willing to pay for it, if you really want the home, then you must pay for the inspection.
Why does FHA use the HUD property guidelines?
HUD oversees the FHA. The FHA insures loans, and when a loan defaults and forecloses, the loan is then purchased by HUD. So HUD actually dictates the guidelines for what properties are eligible to be in insured with a FHA loan.