FHA Minimum Property Standards: What To Know

Are you considering buying a home with an FHA loan? All homes financed with an FHA loan must meet FHA minimum property standards. But what are the FHA’s property requirements, and what can would-be homeowners do to make sure the home they’re interested in meets these standards?

Let’s look at what to expect when buying a house with an FHA loan.

What Are The FHA Minimum Property Standards?

The Federal Housing Administration (FHA) is part of the Department of Housing and Urban Development (HUD) and backs the FHA home loan.

FHA loans have lower down payment and credit score requirements. The minimum down payment requirement is typically 3.5% of a home’s purchase price for borrowers with at least a FICO^® Score of 580.

The home must also meet FHA minimum property standards requirements, which include:

• Safety: The home must meet the FHA standard for livability, including a safe and healthy environment free of common household hazards.
• Security: The property must have measures in place to protect its occupants.
• Soundness: The home shouldn’t have structural problems, such as bulging foundation walls, unsupported floor joists or a cracked foundation.

Before financing a property with an FHA home loan, the Federal Housing Administration must confirm that the property is safe, secure and structurally sound. If the home has significant damage or poses a health or safety risk, it won’t qualify for an FHA loan.

Why do the FHA loan home requirements exist?

The FHA minimum property requirements exist to protect home buyers from purchasing properties with issues or hazards that may lead to harm or expensive repairs and to protect lenders by reducing the risk of mortgage defaults due to deficiencies in a home or costly repairs.

How FHA Property Requirements Work

FHA minimum property requirements are enforced through an FHA appraisal, which involves a site visit and market research. This process is similar to a home inspection. An FHA-approved appraiser conducts the appraisal and evaluates the home for safety, security and soundness.

An FHA appraiser visits the home in person to take photos and make notes, using a form to fill out information about the property and the neighborhood. The report summarizes the physical condition and features of the property, including but not limited to:

• Interior and exterior description
• Foundation description
• Dimensions and adverse site conditions
• Off-site improvements
• Utility summary
• Zoning classification
• Neighborhood characteristics
• Housing trends in the area

The appraiser will estimate the home’s market value by comparing it to recently sold comparable properties (comps) in the area.

Depending on the type of property being appraised, the appraiser will fill out one of the following forms:

• Single-family homes: Standard Uniform Residential Appraisal
• Condominiums: Fannie Mae Form 1073 or Freddie Mac Form 465
• Multifamily units: Fannie Mae Form 1025 or Freddie Mac Form 72
• Manufactured homes: Fannie Mae Form 1004C or Freddie Mac Form 70B

FHA Minimum Property Standards Checklist

The FHA minimum property standards checklist includes what an FHA appraiser looks for when assessing real estate. The property must meet the required standards to be considered livable, such as undamaged interiors and exteriors, safe property access, properly functioning utilities and more. If the property doesn't meet these standards, the seller or buyer must agree to make repairs to meet the FHA’s basic standards. Let’s get into more detail.

FHA Loan Interior Home Requirements

The FHA’s home loan requirements for a home’s interior don’t apply to cosmetic or minor issues that have no bearing on a property’s safety, security or soundness.

The common indoor problems FHA appraisers look for include:

• Insufficient living space: FHA appraisers look for adequate living space in the home to ensure it meets basic livability standards for habitation.
• Lead-based paint and other hazards: In homes built before 1978, appraisers look for defective paint that is chipping, flaking or peeling and will note it as a required repair.
• Absent staircase handrails or railings: Staircases must have handrails or railings leading from the top to the bottom of the stairs. The absence of these safety features will be noted in the appraiser's report.
• Unreliable water supply: The home must have reliable access to running water and all other functioning utilities to meet livability standards, such as gas, electricity and sewage.
• Asbestos: In some cases, this naturally occurring cancer-causing mineral may need to be removed from a home to pass an FHA appraisal. For example, if an appraiser finds asbestos wrapped around hot water pipes in an older home, they may note it on the appraisal report, which may lead to its required removal.
• Defective doors and openings: The appraiser will examine doors, windows and other openings to confirm they’re in working condition and don’t pose any safety hazards, such as hinge issues or other problems. The appraiser will also test for air infiltration and potential water penetration.
• Crawl space: Basements and crawl spaces should show no evidence of termite damage or foundation or wall settling. They should be well-ventilated and shouldn’t be damp or have standing water. These issues can be signs of larger problems.

FHA Loan Exterior Home Requirements

Common outdoor problems FHA appraisers look for include:

• Obstructed property and street access: Homes must have access to a street or other property so homeowners can seamlessly access the property.
• Defective grading and foundation: The foundation must be properly graded so water doesn’t pool near the home and cause damage. The appraiser will also look for foundation cracks or evidence of settling. The home should also adhere to local building codes and demonstrate durability.
• Driveway defects: The driveway shouldn’t have large cracks or rise to create a tripping hazard. Large safety hazards may require fixing to ensure it doesn't pose a health hazard.
• Damaged or aging roof: The FHA states that the roof should have a physical life of at least 2 more years. If it doesn't, the appraiser must indicate it in the appraisal report.

Tips For Meeting FHA Minimum Property Requirements

If you still want to purchase a home that doesn't pass FHA minimum property standards, find out why it didn’t meet the agency’s livability and safety requirements.

It may be something simple, like fixing a broken door or ensuring that you shore up an uneven, cracked driveway.

But who makes the repairs? The seller or buyer can make the repairs that bring the home up to the FHA’s minimum requirements.

If the defects in the home are significant, it likely won’t pass the FHA minimum property standards. In that case, you may need to consider looking for another home or applying for another type of loan.

If you applied for an FHA loan due to its lower down payment and credit requirements, you may need to improve your credit score, pay off debts, increase your down payment amount, find a co-signer or find a more affordable property to qualify for another loan type.

The Bottom Line

While meeting FHA minimum property standards may seem like an extra step, remember that satisfying the FHA’s standards for safety, security and soundness benefits and protects homeowners, as well as protects lenders from mortgage defaults – which allows the FHA to continue providing home loans that make homeownership accessible and affordable.

If you’re ready to take the next step in your home buying journey, start on a mortgage application to discover which financing options are available.