HUD 4000.1 has a section with guidelines concerning the minimum property standards for homes to be purchased with an FHA mortgage. There are instructions to the lender concerning issues such as encroachments, overhead power lines, safety and related issues.
HUD 4000.1 has specific language that requires certain aspects of the home be functional for the life of the loan. “The Mortgagee must confirm that the Structure of the Property will be serviceable for the life of the Mortgage. The Mortgagee must confirm that all foundations will be serviceable for the life of the Mortgage and adequate to withstand all normal loads imposed.”
There is also a section that addresses FHA minimum standards for the remaining economic life of the property. These requirements exist to protect the investment made in the home–what good is it to take out a 30-year FHA mortgage if you are unable to sell the property once that mortgage nears its payoff date?
Even if a borrower chooses never to sell, having the option is an important part of being a home owner, hence the requirements for homes to be economically viable for the lifetime of the FHA loan with certain exceptions on a case-by-case basis as we’ll explore below.
According to HUD 4000.1:
“The Mortgagee must confirm that the term of the Mortgage is less than or equal to the remaining economic life of the Property.”
And what of the exceptions? “If the Property is located in an older, declining urban area and the remaining economic life produces an unreasonably short mortgage term by reason of its location, the Property may be acceptable under Section 223(e), provided:
“–the area is reasonably able to support adequate housing and living conditions for families of lower income levels;
–the location features adversely affecting the desirability and usefulness of the Property do not endanger the health and safety of its occupants;
–the Property is marketable to the typical occupant of the area;
–the physical life of the Property is greater than or equal to the term of the Mortgage; and
–the Mortgage represents an overall acceptable risk as determined by the Jurisdictional HOC.”
As you can see, such issues are handled case-by-case, so the borrower would have to discuss the situation with a lender to see what is possible on a home that may need an exception as listed above.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: