FHA financing offers lower down payment and credit requirements, but not all homes qualify for this program. FHA requires the property to meet HUD’s minimum standards for health and safety in addition to determining the current market value is at or above the purchase price.
Offering your home to FHA buyers increases your buyer pool which can bring a higher price. A seller can decide to accept or decline a purchase agreement with FHA financing, but this discussion should take place with the listing agent before the property goes on the market. If the seller wants to offer the home to FHA buyers there may be additional repairs required by the FHA appraiser.
The FHA Handbook cites the primary areas of inspection are the roof, the foundation, lot grade, ventilation, mechanical systems, heating, electricity, and crawl spaces (when present). HUD’s primary concern is the health and safety of the home buyer who will live in the house. Above all, the home must be habitable and comfortable, without any potential hazards to the occupant.
Here are some of the key inspection areas required by HUD:
- The lot should be sloped to allow water to drain away from the house.
- All bedrooms should have egress to the exterior, for reasons of fire safety.
- Many homes built before 1978 still contain lead-based paint, which is a potential health hazard. In these homes, the appraiser will check for peeling or chipping paint.
- All steps and stairways must have a handrail for safety.
- The heating system must be sufficient to create “healthful and comfortable living conditions” inside the home.
- The roof should be in a good state of repair and must keep moisture from entering the home. It should “provide reasonable future utility, durability and economy of maintenance.”
- The foundation should be in good repair and able to withstand “all normal loads imposed” on it.
The appraiser can site required repairs as a condition of the loan, which means the repairs must be made and re-inspected prior to loan approval.
An experienced real estate agent can help you decided what terms you will accept from a potential buyer, and offer repair advice before you list your home for sale.
Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to firstname.lastname@example.org. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.