Minneapolis, St Paul, MN: When obtaining an FHA home loan, not only does the lender look at your credit, income, debt ratio, etc., they also look at the home you plan on buying. An FHA appraisal will be required, and the HUD approved appraiser will not only determine the homes current value, but they will check to make sure the home meets minimum FHA property guidelines.

The following rules will apply to what does and does NOT need to be in working order or corrected prior to purchasing the home.

An FHA 203k loan can potentially also be used to repair items requiring repair that can not be repaired prior to purchasing the home.  FHA 203k loans are a whole different subject, and not to be taken as a quick alternative. Contact us at (651) 552-3681 for information on 203k loans BEFORE buying a house if you need to go that route.

NOTE: MOST HOMES PASS FHA APPRAISALS WITH NO ISSUES WHATSOEVER. Many have only a few very minor issues that are easily addressed. Therefore FHA loans should NEVER be something to be afraid of when buying most homes.

Roofs and Attics

FHA guidelines need roofs to have at least a remaining useful life of two years. If this requirement cannot be met, the appraisers are responsible for requiring the roof to be repaired or re-roofed. No more than three layers of roofing are permitted. If there are more than two layers of existing roofing, and repair work is required, 100 percent of the old roofing must be removed. If the property is four units or less, is part of an association and has its own roof, the roof must be inspected. In most cases attics are to be inspected for signs of leakage, structural deficiencies, holes or other problems.

Kitchens and Baths

The FHA appraisal guidelines for appraisers regarding kitchens and bathrooms are very basic. Besides having an adequate and acceptable source of water and fixtures, the requirements include checking that the toilet functions properly and is free of leaks. The appraiser must also examine fixtures and check for structural damage and standing water, must inspect sewer or septic systems, look for leaking or badly corroded water lines and check for low water pressure.

Basements and Crawl Spaces

FHA appraisers must evaluate basements for signs of water, dampness or structural problems. Under guidelines current as of 2009, sump pumps are allowed as long as they work properly. The pump power supply may consist of a factory electrical cord connected to the proper electrical receptacle or hard-wired according to acceptable wiring standards. Properties that have accessible crawl spaces must be inspected if there is enough space for at least the appraiser's head and shoulders to enter the area. The appraiser will look for evidence of wetness or standing water.

Electrical

Electrical panels can consist of circuit breakers or fuses. The minimum amount of power required is 60-amps. This is only acceptable as long as it seems adequate for standard appliances, and usually in an old small home. Knob and tube electrical wiring is permitted with 60-amp service. Homes with electrical heat should have 200-amps. Under FHA appraisal guidelines for appraisers, they must look for damage receptacles, missing cover plates and worn and exposed wires.

Heating Systems

All habitable rooms must have a source of heating. Although the heating equipment is not required to be located in the room, each room has to receive sufficient heat. If the primary heating unit cannot be extended into a room, a properly wired baseboard unit, powered by electricity and controlled by a thermostat, is accepted under the guidelines.  Adequate heat is defined as a minimum of 50 degrees Fahrenheit in areas used for living and where plumbing systems are located. The occupants must be able to control the main heating by a thermostat. . Free standing wood stoves are problematic (think small cabin).

Septic Systems, Drain Fields, and Wells

FHA does not automatically check to see if these items are in working order. If the appraiser is told of an issues, sees it in the listing, on the purchase agreement, or notices an issue (like sewage in the drain field, back up sewage), then they will REQUIRE a well and septic certification.  Same with any well issues. Any noted well issues will require a water test. If the septic system is currently failing, it must be repaired. Some systems are working, but are not up to current code, so they must be replaced if the home transfers owners. Many times the county will mandate the systems be brought up to code, and give the new home owner a year or so to do the work. Updating working but non-compliant systems DO NOT have to be done prior to purchasing the home.

Paint

Painting is probably the most common FHA loan required repair. If the home is OLDER that 1978, all chipping and peeling paint ANYWHERE on the property must be removed and repainted.  This is because paint made prior to 1978 may have contained lead, which is a hazard to your health. This includes exterior building and detached garages, and both interior and exterior paint.  Note that the whole house or room doesn't necessarily need to be painted.  Just the peeling and chipping paint.

Other Guidelines

Some other FHA appraisal guidelines for appraisers pertain to requirements on items such as hot water heaters, pest control, flood control and zoning. There are also certain conditions regarding environmental hazard that FHA appraisers must be cognizant of, including the following: asbestos, mole, radon, lead paint and excessive noise. Underground storage tanks and overhead high voltage transmissions lines and towers are also areas of concern.

FHA also provided the following list of conditions that will require automatic repair for existing properties:

• Inadequate access/egress from bedrooms to exterior of home
• Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before reroofing)
• Evidence of structural problems (such as foundation damage caused by excessive settlement)
• Defective paint surfaces (chipping and peeling paint) in homes constructed pre-1978
• Defective exterior paint surfaces in home constructed post-1978 where the finish is otherwise unprotected.

Health and Safety

FHA underwriting guidelines require that lenders review the appraisal to see if the appraiser has made note of property conditions that will affect the health and safety of the occupants. Mold for example is a health issue, and must be removed.

Overall Structural Soundness

FHA underwriting guidelines require that lenders review the appraisal to see if the appraiser has made note of property conditions that jeopardize the soundness and structural integrity of the property. When an FHA appraisal is done on a home, they are looking to make sure that their aren't any safety hazards and that the house is structurally sound.

ITEMS NOT REQUIRED TO BE REPAIRED

In Mortgagee Letter 05-48, FHA provides the following examples of minor property conditions that do not require automatic repair for existing properties, although we still find some appraisers asking for these repairs.

• Missing handrails
• Cracked or damaged exit doors that are otherwise operable
• Cracked window glass
• Defective paint surfaces in homes constructed AFTER 1978
• Minor plumbing leaks (such as leaky faucets)
• Defective floor finish or covering (worn through the finish, badly soiled carpeting)
• Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
• Rotten or worn out counter tops
• Damaged plaster, sheet rock or other wall and ceiling materials in homes constructed after 1978
• Poor workmanship
• Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
• Crawl space with debris and trash
• Lack of an all weather driveway surface