If you will use FHA financing to buy a home, there’s one term you must become familiar with before getting started – Minimum Property Requirements. This set of guidelines pertains to the home. It’s a checklist the appraiser must use when determining if the home meets HUD’s guidelines. If it doesn’t, you cannot secure FHA financing for that home.
The guidelines help you only buy homes that are safe, sound, and sanitary. It’s also a way for the FHA to protect themselves. They guarantee the loan, which means if you default, they pay the lender a portion of the funds they lost on the deal. If the FHA lets you buy a rundown home, they may be paying up sooner than they anticipated. Homes that require a lot of repairs and/or maintenance are harder to keep up with, causing many people to default.
The FHA avoids this situation by requiring their MPR. Keep reading to learn what you must look for in any home you buy with FHA financing.
The Exterior of the Home
First, we’ll start with what the FHA requires for the exterior of the home.
- There must be adequate street access to the home. In other words, you should not have to encroach on another property in order to gain access to your home. You must have direct access from the street to the front of your home.
- There must not be any safety hazards outside the home. The FHA wants to know that your home isn’t located in a toxic area or in an area of direct mudflow, for example. Anything that would put the home or even yourself in danger will not be accepted.
- There must be proper water drainage. All water must drain away from the home, rather than towards it. Water that drains toward the home can cause flooding and/or mold issues.
- The roof must be in good repair. Technically, there should be at least 3 years of life left on the roof. It should also be in good condition, meaning that it doesn’t have any missing shingles or any other visible damage.
The Interior of the Home
Now, we’ll cover the interior of the home as it has separate requirements from the exterior.
- There must be enough living space for every member of your family. You must be able to supply sleeping quarters for everyone, as well as adequate room for grooming and eating.
- All water supplies must be sanitary. You must have access to non-polluted drinking water as well as hot water and sewage disposal.
- All utilities must be in good working condition. If you live in a single-family home, you must have working gas, electric, water, and sewage that is separate from anyone else’s units. If you live in a multi-unit, you can share utilities, but each unit must contain its own shutoff.
- All basement, crawl space, and attics must be in good condition. There must be adequate ventilation in each area as well as no evidence of mold or mildew.
- No evidence of lead-based paint. If the home is older, there could be a risk of lead-based paint. All homes must be free from this material before you can use FHA financing on them.
The Basics of the Minimum Property Requirements
In order to sum it up, the Minimum Property Requirements ensure the home is safe to live in regarding sanitation and physical safety.
The FHA keeps these three things in mind:
- Safety – All areas of the home are safe, whether that means the structure is sound or the area is free from hazards. The home is perfectly livable and will not put anyone’s health in harm’s way.
- Security – The home must have resale value, should you default on it. The FHA needs to know that they will be able to get the fair value for the home, allowing them to make back the money they had to pay out.
- Soundness–The soundness of the home’s foundation and overall condition help ensure its livability and safety for everyone.
Luckily, you don’t have to determine if the home meets all of these requirements. Now that you know them, you can keep them in the back of your mind. It will give you a good idea if the home will pass an FHA appraisal, though.
For example, if there’s a big gaping hole in the roof, it’s a good indication that the FHA will not approve the home. Knowing this now may help prevent unpleasant surprises down the road when you get word that the appraisal did not pass.
Even though the Minimum Property Requirements seem ‘unfair,’ they really are there to protect you, the lender, and the FHA. Consider them a way to prevent you from making a bad investment.