I get the question “What are FHA Minimum Property Standards” all the time so here is my best shot at compiling all of the guides and letters to lay it out in an easily understandable format. Keep in mind it is very much so up to the Lender’s discretion on what they see as a required repair. If there is a question if a property needs repairs to close – contact me, however if you SEE a problem and it can not be resolved before close of escrow or through a escrow repair account – I would consider purchasing with the FHA 203K Renovation or the HomeStyle Renovation loan which will allow you to finance the Purchase Price AND Renovation costs – all with one loan and one approval process.
The appraisal process is the Lender’s tool for determining if a property meets the minimum requirements and eligibility standards for a FHA-insured mortgage. Underwriters bear primary responsibility for determining eligibility; however, the appraiser is the on-site representative for the lender and provides preliminary verification that the General Acceptability Criteria standards have been met.
FHA Roster Appraisers are reminded to report all readily observable property deficiencies, as well as any adverse conditions discovered performing the research involved in completing the appraisal, within the appraisal reporting form.
Examples of property conditions that may represent a risk to the health and safety of the occupants or the soundness of the property for which FHA will continue to require automatic repair for existing properties include, but are not limited to:
- Inadequate access/egress from bedrooms to exterior of home
- Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before re-roofing)
- Evidence of structural problems (such as foundation damage caused by excessive settlement)
- Defective paint surfaces in homes constructed pre-1978
- Defective exterior paint surfaces in home constructed post-1978 where the finish is otherwise unprotected.
If the appraiser reports a potential property deficiency that may pose a threat to the safety of the occupants or the security and soundness of the property, the lender will require an inspection of the condition to determine whether repairs are necessary to mitigate or resolve the problem. Examples of conditions that will continue to require automatic inspections include, but are not limited to:
- Standing water against the foundation and/or excessively damp basements
- Hazardous materials on the site or within the improvements
- Faulty or defective mechanical systems (electrical, plumbing, or heating)
- Evidence of possible structural failure (e.g., settlement or bulging foundation wall)
FHA does not mandates automatic inspections in existing properties but inspections are called for in some circumstances:
- Wood Destroying Insects/Organisms: inspection required only if evidence of active infestation, mandated by the state or local jurisdiction, if customary to area, or at lender’s discretion
- Well (individual water system): test or inspection required if mandated by state or local jurisdiction; if there is knowledge that well water may be contaminated; when the water supply relies upon a water purification system due to presence of contaminants; or when there is evidence of:
- Corrosion of pipes (plumbing)
- Areas of intensive agriculture within ¼ mile
- Coal mining or gas drilling operations within ¼ mile
- Dump, junkyard, landfill, factory, gas station, or dry cleaning operation within ¼ mile
- Unusually objectionable taste, smell or appearance of well water
- Septic: test or inspection required only if evidence of system failure, if mandated by state or local jurisdiction, if customary to the area, or at lender’s discretion
Call me today to discuss your Renovation Loan Options at 916-235-3989 – I have been helping clients with mortgage loan needs since 1999 and I specialize in FHA 203K Renovation Loans in California! (Read More about Sheri here)