FHA minimum property standards checklist: What to know

FHA loans are mortgages backed by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration. Because these loans are guaranteed by the government, lenders can offer more lenient credit requirements. FHA loans can be an appealing option for buyers with lower credit scores and a small down payment. However, to be eligible for an FHA loan, the property must meet standards set by HUD.

Rocket Mortgage offers FHA loans to borrowers with credit scores as low as 580. If you think this type of loan might be right for you, we can walk you through the standards your home will need to meet.

What are the FHA minimum property standard requirements?

The FHA’s minimum property standards cover three requirement categories:

• Safety: The house should provide a safe and healthy environment.
• Security: The property should offer its occupants protection.
• Soundness: The home shouldn’t have any structural defects.

These FHA loan criteria are meant to protect home buyers as well as lenders:

• Borrowers: These standards ensure that properties are safe and meet a minimum standard for livability. Homes must be absent of hazards like mold, foundation issues, and more.
• Lenders: These standards also protect the lender by showing that the property is in good enough condition to be sold for the loan balance should the borrower default.

The FHA minimum property standard requirements are set by HUD. Then, FHA-approved appraisers evaluate individual properties to confirm that they pass the test.

To see the full list of standards, you can access the handbook on the official website of the U.S. Department of Housing and Urban Development.

FHA minimum property standards checklist

You can use the following checklist to make sure a property meets the minimum standards for an FHA appraisal. While an appraiser will handle the official inspection, it’s good for buyers with an FHA loan to understand the overall rules. If you’re thinking of buying a fixer-upper, this can help you rule out properties that won’t pass the FHA inspection.

In addition to certifying that the home meets FHA standards, the appraisal will also determine the home’s estimated value. This can help confirm to both the borrower and lender that the loan amount and purchase price are appropriate relative to the current market value of the home.

FHA property requirements for a home’s interior

FHA loans have certain conditions that must be met for the home’s interior to pass appraisal standards. These don’t include cosmetic issues that are easily fixed.

• Home systems and appliances: The appraiser needs to make sure a home’s electrical, and plumbing systems are functional. Any heating, cooling, or HVAC systems will also be checked. The same goes for any major appliances that are included with the home.
• Basements and crawl spaces: The basement and crawl space of a home should be well-ventilated, with no evidence of termites or other damage. The basement should not show signs of dampness.
• Bathrooms: The sinks and toilets in each of the bathrooms will also be tested. The appraiser will make sure your shower or bath fixture works and that you can get hot water.
• Doors: The appraiser will confirm that all doors are attached and open and close properly. If a door is damaged or does not function, it will need to be replaced.
• Lead content: Due to the widespread use of lead-based paint in houses built prior to January 1, 1978, appraisers will require any paint that’s chipping to be dealt with. The FHA rules say that no paint shall contain more than 0.06% lead content.

FHA loan property requirements for a home’s exterior

The exterior of the home will also be inspected. If any of the hazards listed below are found, the homeowner will likely need to conduct repairs before closing.

• Property access: The property needs to have sufficient access to a street or other means of access so future owners can easily get to and from the home.
• Roof: The FHA requires that the roof has at least 2 years of life left. The appraiser will check for things like holes, loose or missing shingles, and proper connections to gutters and downspouts.
• Foundation: To pass inspection, the foundation must be properly graded and have sufficient drainage to prevent water damage. There shouldn’t be any cracks in the foundation or signs of significant settling. It should adhere to local building codes and present no concerns regarding durability.
• Side grading: The grading on the property must allow surface water to draw away from the building without concentrating runoff onto neighboring properties. The grading also must minimize erosion and earth settlement problems.
• Parking: According to the FHA, the home must have adequate parking for residents, guests, and service vehicles. Buildings with grade level or low windows need to be distanced from parking areas to avoid health hazards from car exhaust exposure.

Understanding the FHA appraisal process

An appraisal must be done to ensure a property meets minimum property standards set by the FHA and determine the home’s current market value. An FHA appraisal is performed by an FHA-approved appraiser using this handbook. Here’s how the process works.

1. Choose a lender and get preapproved. FHA loans are offered by private lenders and backed by the FHA. Be sure to shop around and compare Loan Estimate offers to make sure you’re getting the best terms.
2. Make an offer on a home. Once you’ve found the home you want to buy, make an offer to the seller. If your offer is accepted, you’ll begin the process of closing on your FHA loan.
3. Your lender orders the FHA appraisal. The lender will order the appraisal once you and the seller have entered into a purchase agreement.
4. The appraiser evaluates the home. The appraiser will examine the interior and exterior of the property to make sure it meets FHA standards and determine its fair market value. It can take 2 – 4 weeks between the time the appraisal is ordered and when the report is completed and submitted.
5. The lender receives the report. The lender will need to confirm that the offer and loan amount match the appraised value. If the appraisal comes in low, you’ll need to renegotiate with the seller to have them cover repairs or lower the price.
6. You close on the property. If the appraisal results check out, you’ll be cleared to close on your new home. You’ll pay for the appraisal as part of your closing costs, which typically range between 3% and 6% of the total loan amount.

The bottom line: Your property must pass the FHA appraisal to get an FHA loan

The FHA minimum property standards protect both lenders and buyers from the struggles that come with properties that have significant physical damage or pose a health and safety hazard.

Common issues appraisers look for in the exterior are damaged roofs, cracks in foundations, and broken systems. When it comes to the interior, they look for basic things like missing handrails or chipped and peeling paint that could indicate a lead hazard.

Now that you understand FHA minimum property standards, you can look into your mortgage options by filling out an application.