To use an FHA loan, both the borrower and property must meet certain criteria.
You’ll have to satisfy your lender’s financial requirements, and the property will have to satisfy the FHA home requirements set by the Department of Housing and Urban Development, or HUD.
All homes are held to HUD’s “minimum property requirements,” and new construction must also meet the agency’s “minimum property standards.”
FHA property rules ensure that the home is structurally sound, livable and worth at least as much as you plan to borrow.
Basic FHA home requirements
HUD’s minimum property requirements boil down to this: Homes purchased with FHA loans must be safe, sound and secure.
In this instance, ‘secure’ means something other than ‘safe from burglars.’ Rather, the home should be a secure investment, meaning it will retain value for the life of the loan.
» MORE: Explore FHA loan basics
FHA appraisal checklist
You can find a complete list of FHA appraisal guidelines in HUD’s single-family policy handbook. But, fair warning, it’s pretty dense reading. Here are some of the highlights:
- The foundation must be structurally sound.
- Water must drain away from the foundation.
- Utilities, including water, sewage, heat and electricity, must be turned on during appraisal.
- All appliances must function properly.
- Water pressure must be adequate, with hot and cold water available.
- Paint cannot be chipping, peeling, flaking or otherwise defective.
- Electrical outlets and switches must function properly.
- Windows must open, close and lock.
- Roofing cannot leak and must have at least two years of life remaining.
- Attics and crawl spaces must have vents and be free from damage.
- No active termite infestation.
- The property must be reasonably free from environmental hazards, odors and excessive noise.
How an FHA appraisal works
Deciding whether or not a property meets the FHA home requirements is up to the appraiser. The lender gets to select the appraiser, but the borrower usually pays for their services.
FHA appraisal cost varies by size and location of the home but is typically several hundred dollars.
FHA appraisal cost varies by size and location of the home but is typically several hundred dollars. FHA appraisals are detailed and specific, requiring the appraiser to make observations about all aspects of the structure and plot, according to a HUD spokesperson.
What does an FHA appraiser look at?
Your FHA appraiser will look at the interior, exterior and surrounding land to determine the home’s value and ensure it meets FHA home requirements. They will also take photos to document any issues they observe.
If the home doesn’t meet FHA criteria, your appraiser may recommend repairs or request further inspection by a qualified professional before the transaction can move forward.
If your FHA appraiser says repairs are required, you have a few options:
- Ask the seller to make the required repairs.
- Choose an FHA 203k loan to finance both the repairs and purchase.
- Use a conventional mortgage, which requires a less-detailed appraisal.
An FHA appraisal isn’t an inspection
An appraisal estimates the home’s value for your lender, but an inspection thoroughly evaluates its condition so you can make an informed decision about whether to buy it.
HUD strongly suggests that buyers get a professional home inspection in addition to the required FHA appraisal. The FHA doesn’t perform home inspections, so to get one you’ll need to hire a qualified home inspector in your area.
What types of homes can be FHA-approved?
In general, FHA loans are limited to owner-occupied residences, and can’t be investment properties or flips, homes that were sold within the previous 90 days. Eligible property types include:
- Detached or semi-detached dwellings (often referred to as single-family homes).
- Manufactured housing.
- Townhouses or row houses.
How to find FHA-approved homes
HUD has a searchable list of FHA-approved condo developments on its website. If you want to buy a condominium with an FHA loan, you could start by looking up developments in your area and contacting them to see if there are units for sale. An appraisal of the individual unit is required even if the condo development is FHA-approved.
» MORE: Learn about FHA-approved condos
To find other types of FHA-approved homes, you can search online real estate marketplaces or work with a real estate agent to explore active listings in your area. Any detached house, townhome, manufactured house or other type of residence will likely be eligible, as long as it meets FHA home requirements.