What are FHA loan home requirements? How can you tell if a property meets FHA loan minimum standards? These are important questions to ask when planning for your new home loan.
FHA loan home requirements are found in HUD 4000.1, the FHA single-family home loan handbook. HUD 4000.1 states that while all homes to be purchased with an FHA mortgage must pass the FHA appraisal process, doing so in no way acts as a guarantee that the home is free of defects. A borrower should understand that the FHA appraisal is for the lender, while a home inspection (optional but extremely important) is for the borrower.
In general, FHA loan home requirements include rules which state that the roof must be in good repair, that the electrical and plumbing system in the home must be sufficient to service the property it is installed in, and that there must not be leaks or excessive moisture in either the roof area, the crawlspace, basement, etc.
However, the FHA appraiser will not step out onto the roof, does not have to be an expert in electrical or plumbing systems, and may not be able to spot all areas where excessive moisture may occur. The appraiser may note defective conditions or areas which need repairs, etc. but may not spot more subtle conditions or detect problems which only make themselves known during the operation of certain systems such as sump pumps, heating/cooling systems, solar panels, etc.
The bottom line is that every home is different, every home ages in its’ own unique way, and some issues may only be detected by the trained eye of a professional home inspector. The borrower, the seller, and even the appraiser can miss some issues that may affect the borrower’s ability to enjoy the property once the loan closes.
That is why the FHA and HUD urge all borrowers to get a home inspection and not to rely on the FHA appraisal process alone. Again, the FHA appraisal is not intended for the borrower’s benefit, but rather as a tool for the lender to arrive at the fair market value of the home and insure that the property meets FHA minimum standards. The hundreds you pay for the home inspection could save you thousands of dollars later on.
Borrowers should keep in mind that appraisal fees and inspection fees are paid for services rendered, and will be owed regardless of the outcome of the appraisal or inspection.
We’ll cover specific requirements for properties to be purchased with an FHA loan in future blog posts.