You may have heard that the kinds of properties you can buy with an FHA loan have higher standards. Many people even believe that FHA is only available for complete single-family homes.
You might be surprised to hear that FHA home loans are eligible to buy a wide range of homes, such as condos, fixer-uppers, and construction properties.
The FHA does, however, have minimum property standards pertaining to safety, security, and soundness that may prohibit you from using an FHA loan to buy a home. The kinds of homes eligible for FHA loans and the reasons why the FHA might not approve a home are here.
What Types Of Homes Eligible For FHA Loans?
Before thinking about taking a FHA loan, you must know about the homes eligible for FHA loans. Property types that qualify for FHA financing are numerous. Condos, manufactured homes, single-family homes, and multifamily homes with up to four units are among the various property types on which you can use this loan. Here are the homes you can take FHA Loan for:
Fixer-Uppers Homes
You can inquire with your lender about applying for an FHA 203(k) rehabilitation loan if your house needs significant renovations, such as upgrading the kitchen or installing a new roof. You can purchase and renovate a home you wish to live in with an FHA 203(k) mortgage. For a home you currently use as your primary residence, it is additionally available as a refinance loan.
Although there are no differences in the FHA-required FICO score guidelines for these loans compared to other loans, your lender might have extra requirements to meet.
Although the house remains bound to fundamental structural and energy efficiency requirements, the appraiser will consider the home’s suitability following the completion of the repairs.
Mixed-Use Properties
You can buy a mixed-use property with an FHA mortgage loan if the property you want to buy is primarily residential and you plan to live there as your primary residence.
Although you cannot use an FHA loan to purchase an investment property, a mixed-use property that has at least 51% of its space for residential purposes may be homes eligible for FHA loans type based on the lender’s requirements.
Manufactured Homes
Even if you’re first-time homebuyer, you can finance the purchase of a manufactured home with an FHA loan.
Compared to other FHA-approved property types, you should have a slightly higher credit score for this home loan. In addition to meeting Model Manufactured Home Installation requirements and other local and state regulations, the manufactured home must have been constructed on or after June 15, 1976, in order to be homes eligible for FHA Loans.
The house must be on a permanent foundation and have a minimum square footage. If you’re purchasing a manufactured home and land, you’ll need to submit extra paperwork and meet additional requirements.
Condos
You can use an FHA loan to buy a condo unit in an approved condominium project, though there may be special requirements. To find out if their condo is right for you, carefully review the bylaws and rules of the applicable condominium.
Housing and Urban Development’s (HUD) master list of approved condominium projects must include the condominium complex if you wish to purchase one with an FHA loan. These structures have already received certification that they satisfy the minimal requirements for homes eligible for FHA Loans.
What Are The FHA Minimum Property Standards?
The lender will arrange for an appraisal by an appraiser who has been FHA-approved properties when you apply for an FHA loan.
In order to create a thorough report, the appraiser visually inspects the home’s systems, exterior, interior, and surrounding areas.
We outline some of the main criteria that FHA will be looking for in a property.
The Property’s Livability and Safety
Among the livability and safety requirements are:
- Structural soundness of basements, attics, roofs, and foundations
- Accessibility of utilities like electricity, water, heat, and sewage
- Sufficient living area for daily tasks like eating, sleeping, and cooking
Additionally, the appraiser will be watching for structural and physical risks like:
- Damaged or inadequate foundations
- Construction flaws
- Subpar construction
- Property settling (a certain amount of settling is typical, but the appraiser will search for settling that has resulted in foundational problems or structural cracks)
- Too much moisture
- Leakage
- Deterioration
Lead Paint and Additional Possible Risks
The property must not contain any known hazards that could compromise the home’s structural integrity, marketability, or health and safety.
These include, but not limited to:
- Hazardous substances
- Radioactive materials
- Paint made of lead
- The contaminants
- Risky activities
Older homes constructed before the government outlawed lead-based paint for residential use in 1978 are likely to have it.
However, older homes—even ones that probably have some lead paint—always pass FHA appraisals.
The question is whether the paint is well-preserved or not. One of the major risks associated with lead paint is when it chips or flakes because it becomes more easily consumed, especially if you have small children who may come into contact with chipping paint on the outside or crawl or play on the floors.
However, the risk is greatly reduced if the paint has been hidden, usually by additional layers of non-lead-based paint.
Although professional lead paint remediation is possible, it is an expensive procedure. Instead, a lot of people—both homeowners and renters—choose to keep their homes painted and hide any areas that are known to contain lead paint.
Crawl Spaces and Roofs
Roofs Must
- Keep moisture out of your house.
- Be functional and reasonably long-lasting.
Crawl Areas Need To Be
- Dry and debris-free
- Don’t display any termite or other infestation symptoms.
- Sufficiently ventilated to avoid moisture and heat
- Possess sufficient access to the crawl space.
Land and Property
The appraiser also examines the land and property to determine its suitability and soundness, keeping an eye out for the following.
- Surface drainage is inadequate.
- Risks of flooding
- Degradation
- contamination of the soil
- Elevated levels of groundwater
- Soil instability
- Inappropriate grading occurs when water flows toward the house instead of away from it due to the land’s slope.
- sewage disposal that is overflowing
- Storage tanks or indications of potentially dangerous subterranean storage
You will probably need to take care of any dangerous subterranean storage before you can purchase the house, such as an old oil tank that hasn’t been sealed. But homes eligible for FHA loans aren’t the only ones that do that.
If there is a possible chemical or environmental hazard on the property, lenders may also decline to approve conventional loans. In order to sell the house, the buyer or seller may have to pay for a professional to properly “abandon” and seal the old tanks.
Termites and Infestations Of Other Insects
Termites can seriously harm the structural integrity of any building composed of wood. Regretfully, the damage may be severe by the time an appraiser notices it and may be expensive to repair because it may happen long before it is noticed.
Additionally, FHA appraisers search for indications of rodent and cockroach infestations, among other pest infestations. A certified termite inspector must examine the house and remove any termite infestation if there are indications of termites. Repairing any damage will also be necessary.
What is The Purpose of The FHA Property Requirements?
The Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), provides the backing for FHA loans.
The purpose of these loans is to assist people with low to moderate incomes in becoming homeowners. Homes eligible for FHA loans require only a 3.5% down payment and are available to borrowers with credit scores as low as 580.
However, because the government is funding these mortgages, the FHA wants to ensure that borrowers are purchasing safe, livable homes that will provide them with a high standard of living. The goal is to prevent low-income borrowers from acquiring unsafe or unmaintainable properties.
What Makes a House Ineligible For FHA Approval?
A home must fulfill specific safety, security, and soundness requirements in order to receive FHA approval. If you are ineligible for this you can check on more home loan options.
Compared to standard home inspections, FHA inspections are subject to stricter requirements, and the qualifying requirements are updated frequently. A home may not be eligible to meet homes eligible for FHA loans requirements if any of the following conditions are met:
- Limited availability of drinking water or consistently warm water
- Doors and windows are broken or unhinged.
- Stairs and handrails are either missing or broken.
- The roof leaks or isn’t going to last long.
- An oil and gas well, petroleum line, or hazardous waste site is too close.
- Too near high-voltage power lines or a transmission tower
- Very near a busy road, an airport, or other loud places
- Paint with lead in the home
- Termites, mold, or decay are evident.
- Homes built after 1978 may have damaged sheetrock, plaster, or other wall and ceiling components.
- The heating system is unsafe, out-of-date, or incapable of adequately heating every living area.
- There are leaks or some plumbing issues.
- Poor all-weather driveway for cars or pedestrians
- No way to get to the backyard or front door without going through a separate living area
- Insufficient distance between nearby residences
- The crawl space is either too small, inaccessible, or overflowing with trash and debris.
- Defective floor finishes or incomplete floors
- Not every bathroom has a shower, sink, and toilet.
- worn-out or rotted countertops
- Trip hazards both inside and outside the house
- There are exposed wires in the electrical box.
Conclusion
You can get a lot of FHA loan benefits. Many low- to moderate-income homebuyers, as well as those who can afford monthly mortgage payments but have low credit scores because of past problems, can become homeowners with FHA loans. You make wise decisions after reading this helpful blog related to homes eligible for FHA loans.
Don’t let the property requirements deter you if you believe an FHA loan is the best option for your situation. You can concentrate your home search on well-maintained properties that are likely to pass the FHA appraisal and improve your chances of having your offer accepted now that you know what an appraiser will look for. If you wants to explore more things related to FHA loans, read this: Detailed Guide on Lending Money from Lenders for FHA Loan.
FAQs
Are all homes eligible for FHA Loans?
FHA loan financing is available for the majority of homes, provided that they satisfy the FHA’s property requirements. An FHA appraiser will inspect the home and surrounding property to make sure there are no safety hazards, that there is sufficient access to sewage, electricity, water, and heat, and that the home is safe.
What makes a home ineligible for FHA?
A home that will serve as your primary residence may be purchased with an FHA loan, including townhomes, condos, manufactured homes, and multifamily buildings with up to four units. Additionally, the property needs to be safe, livable, and structurally sound in order to qualify for FHA property standards.
Is it possible for a seller to reject an FHA loan?
Regardless of the kind of loan, sellers are always free to reject a bid and choose a different buyer. However, because they believe the stringent FHA property requirements will delay the sale or reduce its likelihood of closing, sellers may turn down FHA offers.
