FHA Minimum Property Standards & House Requirements

When you use an FHA loan to buy a house, it first has to pass an FHA appraisal. This official evaluation of the home determines two things: its estimated market value and its overall condition.

The first (market value) ensures your lender doesn’t loan you more than the home is worth. The second (condition) verifies that the home meets the Department of Housing and Urban Development’s minimum property standards of being safe, sound, and fit for occupancy.

Are you considering buying a home with an FHA loan? Here’s what to know about these property standards — and what your home will need to look like to pass the test.

What are FHA minimum property standards?

FHA minimum property standards—also called MPS—dictate the condition of a home and its features to be approved for FHA financing. The Department of Housing and Urban Development (HUD) officially sets these standards for two purposes.

Minimum property standards ensure FHA borrowers live in safe, structurally sound, and hazard-free conditions. On top of this, they tell lenders that the property will hold its value over time — and that, should the borrower default on their loan, the home can be sold for a high enough price to cover the remaining balance on the mortgage.

To assess whether a property meets MPS, lenders will order an FHA appraisal, however, borrowers are responsible for the appraisal fee. Only a specially trained FHA-approved appraiser can conduct the appraisal.

Why are FHA home requirements important for buyers?

It’s important for FHA borrowers to understand minimum property standards so they can tailor their home search accordingly. If a home appears unsafe or in poor condition (like a fixer-upper, for instance), it’s unlikely to pass an FHA appraisal, making it ineligible for FHA financing.

While MPS may seem strict, they exist for good reason: to protect the FHA from financial losses and to guarantee FHA borrowers have safe living conditions. They can also ensure that FHA borrowers make a sound investment and that their homes retain their value over time.

For first-time homebuyers — often on a very tight budget — MPS can also help them avoid costly home repairs shortly after move-in.

FHA Minimum Property Standards Checklist

Generally speaking, the FHA’s property standards dictate that a home must be safe, secure, and structurally sound. These apply to all properties considered for FHA financing, including single-family homes and multi-unit properties.

Here’s a look at what FHA appraisers look to verify when evaluating a property:

• The home’s major systems and appliances are functional, including heating, electrical, plumbing, and more.
• The exterior, foundation, and roof are undamaged. The roof must have at least two years of life left.
• The property can be accessed by a safe public or private road.
• The home has a permanent heating system, and the bathrooms have working sinks, toilets, and hot water.
• Access to gas, electricity, potable water, and sewage utilities must exist.
• All staircases must have handrails and are not excessively steep.
• All basements and crawl spaces must be well-ventilated with no dampness or pest damage.
• There is no wood-destroying insect infestation (termites, etc.).
• There is no chipping or peeling lead-based paint in the home.
• The foundation is properly graded, has sufficient drainage, and is not cracked or showing signs of settling.
• There are no loose wiring and no exposed electrical components.

If the home doesn’t meet these standards, the seller may have to make repairs before you can purchase the house with an FHA loan. You might also decide to continue your home search to find more suitable housing.

Common FHA Property Requirement Issues

FHA appraisers encounter some common issues when verifying whether a home meets the minimum property standards. If they find these issues in your home’s appraisal, they must be addressed before you can buy the home with an FHA loan. These include:

Peeling Paint

Peeling, cracking, and chipping paint is common, but if a home built before 1978 has these issues, it will not pass the FHA appraisal due to the regular use of lead-based paint during that time period. If the home was built after this point, it’s typically considered a cosmetic issue and does not need to be remedied before an FHA loan can be issued.

Roof

Roof issues are also a common problem. The FHA wants to see that a home’s roof is in good condition — with no holes, missing shingles, damaged gutters or downspouts, etc. The roof also needs to have at least two years of life left.

Attic Space

Plenty of issues can arise if the home has an attic. An FHA appraiser must be able to fit at least their head and shoulders into the home’s attic space to evaluate whether the attic has adequate insulation for the geographic area, has rafters and decking in good condition, and is free of moisture, mildew, and leaks. The appraiser must also verify that the attic space is properly ventilated.

Street Access

Street access can also pose a problem. A home must have both a safe pedestrian access route and a public or private street for vehicular access. If you’re considering a home without these present (which may happen in more rural areas), it must be remedied before you can get an FHA loan.

What happens if the property inspection fails?

If a home you’re hoping to buy doesn’t pass its FHA appraisal, you can do a few things. First, if it fails the appraisal due to a lower-than-expected market value, you can renegotiate with the seller and see if they will accept a lower price. You can also make up for the difference between the appraised value and your offer in cash or through your down payment.

If the home fails because it doesn’t meet minimum property standards, you’ll need to negotiate with the seller to make repairs before purchasing the home. You would then need to have the home re-appraised once the repairs are finished to ensure it meets FHA standards.

In this case, you would need to pay the FHA appraisal fee again to have the home appraised, however, that is a cost that you can negotiate for the seller to cover.

If none of these options are suitable, you will need to continue your home search. This is why it’s important to keep minimum property standards in mind before you search for homes. An experienced agent can ensure that you only view homes that have a high chance of passing the FHA appraisal.