FHA Home Loan Property Standards

All FHA financed homes must meet FHA’s property standards or “Minimum Property Standards” (“MPS”for short). 

Minimum Property Standards FHA

FHA leaves the final call regarding a homes condition up to the FHA appraiser. However, FHA gives standards homes must meet. The 3 basic ideas behind FHA’s Minimum Property Standards are: 

  1. Safety
  2. Soundness
  3. Security

As a result, FHA appraisers use these 3 ideas in reviewing each home.  Then, FHA Appraisers list out any items violating these ideas in their report.

Examples of FHA Property Violations

  • Broken Windows
  • Exposed Wiring
  • Faulty Door / Window Locks
  • Defective Paint Surfaces on Homes Built Before 1978
  • Lack of a Working Heating Unit
  • Safety Bars on Outside Windows

FHA property violations require resolution for FHA to insure or “back” a home loan.  For repairs not resolved prior to closing, there are 2 great options FHA accepts:

  1. FHA Escrow hold-back
  2. FHA 203k loan

Alternatively, while minor cosmetic issues are not property violations, they may impact the valuation of the home.

FHA Required Inspections

FHA home loans do not require Termite inspections as a standard rule.  However, pest inspections and related repairs are required only if the FHA appraiser notes pest related damage.  

FHA also requires licensed contractors inspect the home in some cases. For example, when the appraiser notes structural damage or faulty systems (plumbing, electrical or heating) on their appraisal.

FHA Appliances Rules

Generally, FHA does not require appliances such as a stove or fridge be present in the home.  However, there must be a space for a stove.  Also, FHA requires homes have a working dishwasher if space for a built in dishwasher exists.

History of FHA’s Property Policy

FHA created the “As-Is” policy on January 1, 2006.  As a result, property rules for FHA loans almost mirror Conventional loans.  Prior to the “As Is” policy FHA property rules were tougher.  As a result, FHA buyers had a harder time having their offers accepted.

FHA buyer’s had an unfair disadvantage.  Due to an evaluation, HUD/FHA updated their rules.  In the end, FHA financed homes must meet the “As-Is” policy rules and these 3 standards:

  • Safety
  • Security
  • Soundness