FHA Home Repair Guidelines

It's common among homebuyers to overlook the benefits of government-insured loans. Some borrowers aren't even aware of loan options outside of conventional products. From smaller down payment requirements and less-stringent rules about credit scores, there are plenty of benefits that come with FHA, USDA*, and VA (government-insured) loans. However, the loan process does look a little different, especially when looking at repair guidelines. Prior to 2004, sellers were sometimes wary of accepting offers from buyers who obtained an FHA loan. The FHA often required too many repairs to be made in order for the loan to close, and the seller ended up paying for the majority them. (Longer loan closing wait time + additional money toward repairs = not a fun experience for either party.) Thankfully, the FHA home repair guidelines have relaxed over the past 15 years, and sellers are more open to accepting offers from borrowers with this type of loan. If you think an FHA loan might be the best financial move for you, you should do two things:

• Meet with a Mortgage Advisor to discuss your loan options.
• Keep reading.

FHA vs Conventional Transactions

In conventional loan transactions, an appraiser will evaluate the property to determine its market value. FHA appraisal guidelines, on the other hand, include detailed instructions for inspecting the property. These instructions require the appraiser to not only evaluate the home's value but to also require a thorough inspection to make sure the home will meet the HUD's minimum standards for health and safety. According to the FHA Appraisal Guidelines for 2019, the appraiser must complete the following steps, at minimum:

• Visually inspect the property both inside and outside.
• Take photos of the property to be included within the loan file. (The photos must show the sides, front and rear of the home, as well as any value-adding improvements such as a pool or patio.)
• Photograph each comparable sale transaction that is being used to support the appraisal.
• Obtain and provide a copy of a street map that shows the location of the property and each comparable sale used during the valuation.
• Take photos that show the grade of the lot, if it's a proposed construction.

Who Makes the Repairs?

Depending on how the buyer's purchase offer is written will determine who must make the FHA required repairs. This is good news for sellers. The buyer's agent can specify a limit (or dollar cap) on the repairs, or the buyers might be free to do their own lender-required repairs with the seller's permission, according to TheBalance. On rare occasions, if the buyer switches from a conventional loan to an FHA loan mid-transaction, the seller might only go through with the purchase if the buyer agrees to make the repairs. It all depends on the circumstance at hand. Your Mortgage Advisor and Realtor are great resources for questions regarding this process.

FHA Repairs that Must Be Completed (Prior to Closing)

So, just how strict are these rules and guidelines? Before you dismiss a potentially amazing house because of a few minor repair needs, check out this list. There may be a condition that the seller will be required to fix before the home is yours. The FHA Repair Guidelines for 2019 include, but are not limited to:

• Peeling paint in the home (If the house was built before 1978, it could be a hazard.)
• Unpainted downspouts and broken rain gutters
• Rotting outbuilding in need of demolition
• Exterior doors that don't properly open and close
• Exposed wiring and uncovered junction boxes
• Major plumbing issues and leaks
• Inoperable HVAC systems
• Leaky or defective roofs
• Roofs with a life expectancy of fewer than three years
• Active and visible pest infestation
• Rotting windowsills, eaves, or support columns on a porch
• Missing appliances that are usually sold with a home, such as a stove
• Foundation or structural defects
• Wet basements
• Evidence of standing water in the crawl space
• Inoperable kitchen appliances
• Empty swimming pools, pools without working pumps, and abandoned pools with mosquito or fish
• Leaning or broken fences

Do you still have questions about these guidelines? We're here to help. Contact a Mortgage Advisor today to learn more.

*Some state and county maximum loan amount restrictions may apply.