I get a lot of questions about FHA / HUD standards and what a property needs to qualify. Here’s the deal: FHA is primarily concerned that everything in a house functions properly and that there are no health and safety issues. FHA continually says, “Soundness, Safety & Security” as their motto. As an FHA certified real estate appraiser, the inspections I do are based upon guidelines from the United States Department of Housing & Urban Development (HUD).
I was in the town of Locke a couple weeks ago and I snapped the following shot of a property I happened to pass. Do you think this property would qualify for an FHA loan?
Here is a sample of some of the things I look for while on an FHA inspection:
- Appliances must be in functional use. If there is a hood, it must work. If there is a dishwasher it must work. If there is a stove, it must work…
- The heating unit must be in working order (and AC if applicable)
- Paint must not be chipping, peeling, or flaking on homes built before 1978. There must be no defective paint or exposed wood for properties built after 1978. If there is an issue with paint, it needs to be cured properly by actually scraping the paint instead of just painting over with new paint.
- The water pressure must be adequate for the house. Appraisers flush toilets, turn on all faucets and ensure that both hot and cold water are working.
- The water heater must be in working order.
- The attic must be inspected and we make sure that there are vents, no evidence of a previous fire, no exposed or frayed wires, and that sunlight is not beaming through.
- Attics and crawlspaces are to be viewed at least with head and shoulders into them (if present)
- The crawl space must be inspected and we make sure there is not excessive debris or signs of standing water or any other foundation support issues.
- Electrical outlets must work.
- Toilets must flush and be mounted
- No leaks in the roof.
- The carpet does not have to be perfect (stains or minor tears okay). If there is a health or safety issue with the flooring, then that is a red flag.
- A house does not need new interior paint.
- Windows cannot be broken. Cracks can be okay so long as there is not an issue with safety, soundness and security.
- No dangling wires from missing fixtures.
- Water heaters must be properly attached with straps (local code says that water heaters need to be strapped and FHA requires water heaters to meet code).
- Stoves are not required unless they are drop in stoves.
- FHA doesn’t require air conditioning, insulation, smoke detectors or the like, but if they are there they must work as they were intended.
The photo above clearly demonstrates there might be a safety issue with the structure. It doesn’t look very sound, does it? Do you see any other violations of HUD minimum standards?
This type of knowledge is vital for first-time buyers, sellers and investors especially. Please let me know if you have any questions. I am glad to help buyers, agents, investors, brokers and anyone else know more about FHA standards and the appraisal process. FHA loans have really dominated the market in the Sacramento Region, so it’s important to be aware of potential issues that might make or break a deal. You can reach me at 916-595-3735 or ryan@lundquistcompany.com.