These standards exist for a few reasons. Some common problems can prevent a house from meeting the minimum standards for FHA loans.
What Are FHA Minimum Standards?
The FHA sometimes includes local building codes into its property standards during its inspections. It has an extra requirement as well. Certain parts of the home must be “durable.” This rule applies to windows, doors, gutters, downspouts, kitchen cabinets, carpet, and paint. Building materials must be able to resist weather, rust, fire, and moisture. This includes insulation, caulking, joint sealants, doors, windows, and glazing panels. The rule applies to outdoor wall finishes as well, such as siding and paint, gutters, downspouts, wood porches, and decks. The home must be a single, marketable real estate plot. It must be “safe, sound, and secure." The home must be livable. This includes a continuous and sufficient supply of potable water, sanitary facilities, safe disposal of sewage, space, and working appliances. At least one bathroom must have a toilet, sink, shower, or bathtub. There must be adequate heating, hot water, and electricity.
How Do FHA Minimum Standards Work?
An FHA-approved appraiser will inspect the home inside and out. They document their findings and report them to the lender, who then decides which repairs are needed for the house to qualify for an FHA loan. The loan can’t be funded until the seller fixes any problems that are found. The FHA divides issues into two main groups: cosmetic repairs and required repairs. The rule of thumb for a required repair is that there must be an issue that involves safety, security, or soundness. A safety issue is one where the health of occupants is at risk. A security issue is one where their belongings would be at risk. An issue of soundness is one where physical issues or conditions affect the structural soundness of the home. Minor or cosmetic issues liked cracked windows, badly soiled carpet, and plumbing leaks often won’t hold up the closing process, but required repairs will most likely have to be made before closing. Housing and Urban Development (HUD) guidelines state that the repairs must be made by qualified professionals.
Common Property Issues
Common issues that don’t meet minimum standards and that would require further inspection or repair include:
Underground piping, mechanical, and electrical systems that aren’t protected against corrosionA wood home without termite protectionAn insufficient supply of safe waterFaulty gutters and downspoutsDoors that aren’t durable and don’t lockMissing screens on certain windowsLeaking roofing that needs to be replacedFaulty plumbing, electrical, or HVAC systemsStanding water near the foundationMissing kitchen appliances or any that don’t work
Why Do FHA Minimum Standards Exist?
These standards help a buyer to avoid buying a money pit, but their main purpose is to protect the lender, Aragon said. A lender wants to know that the home is in shape that’s good enough to allow it to be sold at a price that will avoid too much financial loss if the borrower were to stop making payments. This would force the home into foreclosure and result in a sale.
