Before an owner can market a property to buyers that want to use a FHA loan, he will want to familiarize himself with the FHA’s standards. FHA won’t insure loans on just any property.
While their standards aren’t as stringent as they used to be, a home
needs to be in relatively good condition to qualify for FHA financing.
Location And Lot
To qualify for FHA financing, the property has to be located on a road or easement that lets the owner freely enter and exit.
The access also has to be paved with a surface that will work all
year a long dirt driveway that washes out in spring won’t qualify.
The FHA also wants the lot to be safe and free of pollution,
radiation and other hazards. For that matter, it also needs to provide
adequate drainage to keep water away from the house.
The FHA’s requirements for making a loan start with the home’s roof.
To pass muster, the house must have a watertight roof with some future
life left. In addition, if the roof has three or more layers of old
shingles, they must all be torn off as part of the replacement process.
The property’s exterior has to be free of chipped or damaged paint if
the home has any risk of having lead paint. Its foundation should also
be free of signs of exterior (and interior) damage. It also needs full
The property’s interior also needs to be inspected. FHA standards
require that the home’s major systems be in good working order.
Bedrooms should have egress routes for fire safety and the attic and basement should be free of signs of water or mold damage.
The bottom line is that the FHA wants to make loans on homes that
borrowers can occupy. This doesn’t mean that a home has to be in perfect
condition to be sold to an FHA mortgage-using borrower. It just needs
to be a place that they can live.