FHA Loans are the most popular type of mortgage loan used by first-time home buyers.
But you cant just buy any type of property, it needs to meet the FHA minimum property standards to be eligible.
The Federal Housing Administration established these minimum property standards so they are not guaranteeing loans on sub-standard properties.
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The FHA Loan Process
When you get an FHA home loan there are certain steps to the process.
Get Approved – You will want to get pre-approved before making an offer on a home. Speak to a loan officer with a HUD-approved mortgage lender to run credit and verify your income and assets.
Loan Application – Once pre-approved you will complete a loan application to start the process
Home Appraisal – The lender will order a home appraisal of the home to determine the fair market value of the property and ensure the home meets the FHA minimum property standards.
Home Inspection – While not required it is highly recommended that you have a professional home inspection company inspect the home for any issues.
Underwriting – Once all of your documents are completed they are sent to the underwriting department to determine final approval.
Closing day – Closing will be held at the title company where all documents are signed, closing costs and downpayment are paid, and you receive the keys to your new home.
FHA Home Requirements
HUD, the U.S. Department of Housing and Urban Development implemented the guidelines for properties purchased with an FHA loan. Homes purchased with an FHA loan must meet certain criteria in order to be eligible.
Home must be complete and “marketable” – The interior and exterior should be a complete home. If the kitchen is not complete, or other structures are not present, it will not meet the FHA home requirements.
Must be accessible – The property should have public access and not require trespassing on private property to enter.
Safe Access – The home should be safe to access from a public road.
Free from Hazards – The property should be free from any hazards such as, lead-based paint, visible electrically wiring, etc.
If any items are in need of repair that affect the safety of the home must be replaced prior to the final inspection. Such items can include.
- damaged or missing handrails
- Entry doors that are cracked or otherwise inoperable
- Home must be free of termites and unprepared wood damage from termites
- Counter tops that are cracked or worn out
- Broken or cracked windows
- Damaged or defective flooring (badly worn or soiled carpets and cracked and missing tile.)
- Holes and damage to interior walls and sheetrock
- Crawl space free from debris and trash
- Severely cracked and uneven concrete/sidewalks/driveways
For all of HUD’s minimum property standards visit the HUD website.
What if my Home Doesn’t Meet these Requirements?
If the home you’re buying doesn’t meet the FHA minimum property standards then you will need to have repairs done before you can close. You should negotiate with the seller and have them make the nessecary repairs so you can complete the purchase.
In your home offer there should be a contingency that allows you to back out of a contract if the property does not meet the home requirements.
If you are buying a fixer-upper and want to borrow additional money to make renovations and repairs to the home. You can consider an FHA 203k loan, which is a type of home improvement loan that gives you up to $35,000 to make additional repairs to a home.
The Bottom Line…
When buying a home with an FHA loan there are minimum property requirements to be met. To sum it up, the home should be in good condition and livable.
If the home fails to meet property standards the borrower should ask the seller to make the needed repairs to finalize the purchase agreement.